


^.,.-^.*ci 



•W 







w 



«# 












W Z 



V V .* S< 




;• y% 'SK : /^ : ^#^ 












' ** 




v .•i^Lr*:^ aO 



' ^ 





















<f *p 







» /T * 









c .0 



^' • 



^ 



V .*. 



w 
^ 









4°^ -' 









^6K 



V^ f \/ V*^V V™V\ V : ^V 









P* Oi*&.^ 






•\'"-* J> 



'of ? 



**«< 



. **0' 



^°<* . 




,4^ c «"., "<s> 




?»* 4* v "\ j -JBK° ^%. o °WK*" ** *^ ^fSK** j* \ win 



,-io. 



* *^ V 












^•' ^-V ;lBi': *^% \wm: **>% 



K<f V^ft-'V- V^R^ v-^V V^ 

%* v '°X^V °v^v ^X^yC 



COST KEEPING AND 
SCIENTIFIC MANAGEMENT 



Published by the 

McGraw-Hill BookCompany 

New \orIt 

Successors to theBookDeparhnents of the 

McGraw Publishing Company Hill Publishing' Company 

'Publishers of Books for 

Electrical World The Engineering" and Mining Journal 

Engineering Record Power and The Engineer 

Electric Railway Journal American Machinist 

Metallurgical and Chemical Engineering 



COST KEEPING AND 
SCIENTIFIC MANAGEMENT 



BY 

HOLDEN A. EVANS 

NAVAL CONSTRUCTOR. UNITED STATES NAVY 



McGRAW-HILL BOOK COMPANY 

239 WEST 39TH STREET, NEW YORK 

6 BOUVERIE STREET, LONDON, E.C. 

1911 



Copyright, 191 i ; by 
McGRAW-HILL BOOK COMPANY 






PREFACE 

This book is written for jobbing shops and small manu- 
facturing plants where accurate cost keeping and the principles 
of good management have received but little attention. It 
is hoped that it will not be without interest to the officials of 
large manufacturing establishments and shipbuilding plants. 

Many owners and managers desire to improve the cost 
system, but are deterred by the belief that this cannot be done 
without the aid of expert accountants who will devise an 
elaborate system which will require a large clerical force to 
maintain. The methods which I have outlined are simple 
and require but little clerical labor. Any manager can adapt . 
this system to meet the requirements of his work. 

The efficiency of a large plant under my supervision has 
been greatly improved by adopting and following the princi- 
ples of management advocated by Mr. Fred W. Taylor. I 
believe that in thousands of shops marked improvement will 
be made if these principles are followed. The methods de- 
scribed in the chapters devoted to management should be of 
assistance to the manager who wishes to take the first steps 
towards Scientific Management. 

Holden A. Evans. 
Seattle, Wash., 

June i, 1911. 



• CONTENTS 

CHAPTER PAGE 

I. THE IMPORTANCE OF ACCURATE COSTS . . . . i 
_ Cost keeping for manufacturing establishments compara- 
tively simple — Repair and jobbing shops present difficulties 
in cost accounting — Inaccurate costs among manufacturers 
making standard articles — Lack of knowledge of costs dis- 
turbs trade — The reasons for so few accurate cost systems 

— Cost keeping versus accounting — Cost systems secret and 
not subject to criticism — Value of accurate costs frequently 
not realized by some successful managers — Can an estab- 
lishment make money without a good cost system? 

II. THE PURPOSES OF A COST SYSTEM .' n 

Little literature on cost systems for manufacturing estab- 
lishments — What a manager can learn from a proper cost 
system — Monthly scrutiny of indirect charges — Monthly 
balance desirable — Dividends which are paid from capital 
and not from profits — Is every department a money maker? 

— Definition of good judgment. 

III. THE VARIOUS ELEMENTS OF COST 23 

Direct labor — Importance of accuracy in obtaining direct 
labor charges — Direct material — Indirect cost — Total fac- 
tory cost — Elements of the indirect cost — Depreciation — 
Usual methods of determining depreciation — Determination 
of depreciation to be charged off each year — Methods fol- 
lowed for estimating and apportioning depreciation usually 
unsatisfactory — Taxes and insurance — Up-keep of plant — 
Interest and rent. 

IV. DISTRIBUTION OF INDIRECT COSTS ...... 40 

Distribute indirect costs in accordance with benefits re- 
ceived — Distribution by machine rates the most scientific 
method — Difficulties in using the machine rate system — 
Inaccuracies of distribution by direct labor method — Dis- 
tribution by direct labor — The use of monthly rates or 
average rates — Most simple method of distribution best for 
majority of shops — The work in each shop or department 
should carry its own expense burden — Power plant ex- 
pense — Storehouse expense — General expense — Distribu- 
tion of general expense and shop expense — Selling expense. 

V. PRODUCTION ORDER, SHOP ORDER AND COST SEC- 
TION RECORDS 55 

Uniform sizes for blank forms — The production order — 
Shop orders issued by authority of the production order — 
Mustering the workmen — Record of labor charges — Record 
of material charges — Labor and material charged to ex- 
pense orders — Cost section records — Job order card — Cost 
figures should be used and not treated as mere records — 
The cost of work card — Summary of material requisitions 

— Advantages and disadvantages of the system. 

vii 



CONTEXTS 
CHAPTER PAGE 

VI. INDIRECT CHARGES 71 

Subdivision of indirect charges — Charge symbols for ex- 
pense account orders — General expense subdivisions — Shop 
expense subdivisions — Power, heat and light subdivisions — 
Storehouse expense subdivisions — Distribution of store- 
house expense — Part plant development — Plant develop- 
ment account — Selling expense subdivisions — Distribution 
of selling expense. 

VII. SUPERVISION OF THE EXPENSE ACCOUNTS ... 88 
Works manager versus financial control — Ignorance of 
the relation of overhead charges to total cost — Danger of 
superficial criticism of expense accounts — Increase of shop 
expense frequently results in increased efficiency, while a 
decrease results in decreased efficiency — Comparison of ex- 
pense percentages of different establishments gives no infor- 
mation — The control of the expense charges — Monthly 
analysis of all expenses. 

VIII. METHODS FOLLOWED IN THE PAYMENT OF LABOR 100 
Day work system — Contract system — Halsey premium 
system — Premium system compared with the bonus system 
— Gantt bonus system — Taylor differential piece rate sys- 
tem — Fixing rates and standard times. 

IX. MANAGEMENT 114 

Improvement made by an analysis of costs compared with 
improvement due to scientific methods — The correct type of 
management — Management is an art — Opposition to the 
new type of management — Scientific management defined — 
Analysis should be made of work to be accomplished before 
it is undertaken — Best methods for accomplishing work 
should be determined before it is begun — Men best suited 
to the work should be used — Importance of maintaining, 
tools and appliances in excellent condition — Real cooper- 
ation between employers and employees — To follow the 
principles of scientific management is not a simple problem. 

X. WASTED TIME DETECTED BY TIME STUDIES . . 127 
Few managers realize the large amount of time wasted 
in the average shop — Time wasted due to loafing — Wasted 
time due to employment on unsuitable work — Time wasted 
due to unnecessary waits — Time wasted due to poor equip- 
ment — A manager should know the time wasted and the 
causes — 'Stop-watch time studies expose defects in methods, 
organization and equipment — Stop-watch time studies in a 
drop forge shop — Stop-watch time studies bring out funda- 
mental conditions under which work is accomplished — Im- 
provements made in a large smith shop due to time studies. 

XI. THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 

WHICH CAN BE FOLLOWED BY A MANAGER . . 137 

It requires both ability and experience to become an expert 
in scientific management — Duties of officials should be 
clearly defined — Diagram of organization should show limits 
of authority and responsibility of each department head, and 
their relations to each other — Similar duties should be 
brought together to be performed by one man or group of 
men — Shops should be controlled by an expert shop super- 
viii 



CONTENTS 
CHAPTER PAGE 

intendent — Shop superintendents should have competent 
assistants — Changes should not be undertaken until thor- 
oughly investigated and effects fully considered — Investiga- 
tion of small tool equipment — Investigation of the care of 
belting — Investigation of machine tools and transmission 
machinery — Care of jigs, and special tools — Introduction 
of functional duties — Selection of assistants and gang 
bosses — Beginning of the planning department — The use 
of time studies — Improvement of plant equipment — Stand- 
ardization of shop methods — Functional management out- 
side of shops — Improvement of store system. 

XII. METHODS WHICH LEAD TOWARDS SCIENTIFIC 

MANAGEMENT . , 169 

Improvement in a government establishment made by the 
application of the principles of scientific management — 
Shop system employed based on the teachings of Mr. F. W. 
Taylor — Delivery of papers between shops and offices — 
Records of workmen — Shop orders and promises for com- 
pletion of work — -Material supply — Urgent work or papers 

— Transportation of material — Plant railway system — Re- 
ceiving and dispatching space in each shop — Central tool 
grinding and issue room — Weekly conference of heads of 
departments and foremen — Daily conference of manager 
and heads of departments. 

XIII. MACHINE SHOP METHODS .184 

General instructions — The results to be obtained by the 
planning department — Planning department and shop staff 

— Duties of the chief planner — Duties of the material man 

— Duties of the instruction card man — Duties of the stand- 
ing order board man : — Duties of the shop clerk — Duties of 
the time study man — Duties of the foreman — Duties of the 
gang boss — Duties of the speed boss — 'Duties of the in- 
spector — Duties of the move man — Duties of the head tool 
maker — Duties of the repair man — Duties of the belt man 

— Delivery of tools to machines — The operation of the sys- 
tem — Cooperation among the planners and the shop staff. 

XIV. ORGANIZATION OF A SMITH SHOP, A WOOD- WORK- 

ING SHOP, AND A CANVAS AND FLAG SHOP . . 208 

The blacksmith shop — General arrangement of shop — 
Subdepartments of the shop — ■ Duties of foreman — Duties 
of assistant foremen — Duties of route man — Duties of 
office clerk — Duties of material man and move man — 
Operation of the shop system — Organization of a large 
wood-working shop — Details of shop system — Organiza- 
tion of a canvas shop and flag shop — Details of shop sys- 
tem. 

XV. REDUCTIONS IN COST DUE TO SCIENTIFIC METH- 
ODS ..... 232 

Reductions made in shipbuilding costs — Reductions in 
boat building costs — Reductions in the cost of wood calking 

— Changes made in a boiler shop and resulting reductions in 
costs — -Reductions in the cost of machine shop work — 
Records of time reductions in canvas work. 



COST KEEPING AND 
SCIENTIFIC MANAGEMENT 



COST KEEPING 
AND SCIENTIFIC MANAGEMENT 

CHAPTER I 

The Importance of Accurate Costs 

Many manufacturing establishments throughout the country 
have excellent cost systems, and in the majority of these the 
value of costs is well understood and the data obtained from 
the cost records are utilized to their full value. On the 
other hand, there are far too many establishments in which 
little use is made of costs other than in fixing selling prices, 
and in some cases costs are not obtained. 

The most accurate cost systems are usually found in estab- 
lishments where but few classes of standard articles are 
manufactured. This is readily explained, as it is compara- 
tively easy to devise a satisfactory system for such an estab- 
lishment, and it is so simple that it is difficult to go wrong in 
its application. Moreover, the cost of maintaining such a 
system is small. Accurate cost keeping in its simplest form 
may be applied to the manufacture of a single class of 
standard articles. As the number of classes is enlarged, par- 
ticularly if the products vary greatly, cost keeping becomes 
more difficult and expensive. Notwithstanding this, nearly 
all strictly manufacturing establishments have fairly satisfac- 
tory cost accounts. 

In a jobbing shop or in a combined manufacture and 
repair shop accurate cost keeping is not simple. The princi- 
pal difficulty experienced is the proper distribution of the ex- 
pense burden. It is, therefore, natural that the worst ex- 
amples of cost keeping should be found in these classes of 
shops. In some of these establishments attempts are made 

I 



2 COST KEEPING AND SCIENTIFIC MANAGEMENT 

to obtain accurate costs, but in the great majority the results 
are not worthy of the name of cost records. Little is known 
of the advantages to be gained by accurate costs, and there 
is comparatively little interest shown in the subject. In many 
of the smaller establishments the owner or manager has risen 
from the shop and he knows little or nothing of modern 
accounting. When he worked in the shop the cost record 
consisted of the time books. Such an owner or manager has 
a horror of red tape, and to him modern cost keeping is red 
tape to an extreme degree. Under these conditions it is not 
surprising that accurate cost records in jobbing repair shops 
are very rare. 

Accurate cost keeping is very difficult in a large shipyard 
which is engaged both on new work and repair work. There 
are numerous independent shops in such an establishment 
which vary greatly in equipment and in the class of the 
products. It is necessary that the costs should be known 
not only by the many jobs included in the whole, but also by 
shops, and by the classes of labor employed. The proper 
distribution of the overhead burden is also exceedingly diffi- 
cult. These questions will be discussed in detail in subsequent 
chapters. 

INACCURATE COSTS AMONG MANUFACTURERS MAKING 
STANDARD ARTICLES. 

Accurate costs are sometimes not obtained even in establish- 
ments where more or less standard articles are manufac- 
tured. The report of the cost committee of the National 
Machine Tool Builders' Association contains the following 
significant statement : " Machine tool manufacturers making 
similar and competitive machine tools discovered among them- 
selves ruinous and unprofitable competition, based, presuma- 
bly, on actual costs. Comparisons showed, however, that 
even where there were fair cost system methods, important 
and appreciably large elements were treated by different man- 
ufacturers in different ways." 

This is a polite way of stating that some of the members 



THE IMPORTANCE OF ACCURATE COSTS 3 

of the machine-tool builders' association did not obtain actual 
costs, in that they omitted some of the important elements 
that go to make up total costs. These makers were selling 
their goods below cost and were demoralizing the entire busi- 
ness. They, however, did not know this; they undoubtedly 
considered that they were making a fair profit, when sud- 
denly they found themselves face to face with bankruptcy. 

If these conditions exist in the manufacture of machine 
tools, is it to be wondered at that the shipyards, where cost 
keeping is far more difficult, do not know their costs? Is it 
surprising that the thousands of jobbing repair shops do not 
know what cost keeping means ? 

The machine-tool builders were aroused by the gravity of 
the situation. They appointed a committee which devised a 
uniform cost-keeping system which can be successfully em- 
ployed by all makers of machine tools. No doubt this system 
is not used by all machine-tool builders, but the report of the 
committee was widely read and studied by them and general 
interest was created in the importance of accurate costs. This 
brought beneficial results, and the costs now recorded more 
nearly represent actual costs. 

Unfortunately no uniform cost system can be devised for 
the various manufacture and repair plants throughout the 
country. The successful system must be developed for each 
class of work and adapted to meet local conditions. There 
are, however, fundamental principles of great importance 
which are applicable to all systems. These principles are vio- 
lated in thousands of establishments, and until this is cor- 
rected actual costs are impossible. 

It is of importance to every manufacturer, it is to the benefit 
of every stockholder in an industrial establishment, that inter- 
est should be awakened in cost accounting, and that accurate 
costs should be obtained in every manufacturing shop and 
every repair shop in the country. Just so long as costs are 
not known there will be the same ruinous competition that 
existed in the machine-tool trade. 



4 COST KEEPING AND SCIENTIFIC MANAGEMENT 

LACK OF KNOWLEDGE OF COSTS DISTURBS TRADE. 

The competition which is most feared by a well-conducted 
establishment is that of the establishment which does not 
know its costs. It is often the case that a well-conducted, 
efficient establishment which has figured on a moderate profit 
is far underbid by a less efficient establishment, and the work 
taken at a price below actual cost. It is no satisfaction to the 
efficient establishment to know that the successful bidder will 
soon go into bankruptcy, for there will be someone else in 
the field with as little knowledge of real costs. These condi- 
tions demoralize business and they will continue until actual 
costs are known. This situation explains what otherwise 
might be considered remarkable variations in bids submitted 
for the same work by a number of establishments located in 
the same vicinity and working under approximately the same 
conditions. It is not unusual to see such bids vary from 
50 per cent, to 100 per cent. 

In a large repair job which recently came under my ob- 
servation, the specifications of the work were in great detail, 
and called for exactly the work to be accomplished. The 
bids that were received ran all the way from $425,000 to 
$517,000. I recently obtained bids on some small cast-iron 
cylinders, rough machined, for small engines. These ran 
from 6 cents to 21 cents per pound. 

A few years ago it was not unusual for bids on battleships 
to differ by as much as half a million dollars. This enormous 
difference did not represent difference in efficiency of the ship- 
yards, nor difference in the cost of labor or material, nor 
difference in the figured profits. It was almost entirely' due 
to lack of knowledge of actual cost of similar battleships 
previously built. It was due to these causes that large con- 
tracts for warships were taken at prices far below cost, and 
consequently several yards were forced into bankruptcy. 
These experiences have taught their lessons and there are few 
of the shipyards that do not now know at least their total 
costs on each contract. 



THE IMPORTANCE OF ACCURATE COSTS 5 

In small shops, however, the lesson is not so quickly learned. 
A shop goes under here and there, but the real cause is not 
known, and another takes its place, and there always seems to 
be enough shops without a knowledge of costs to keep business 
disturbed. On the Pacific Coast these conditions prevail at 
present, and there is little prospect, except through luck, of 
the most efficient shop, which has figured on a moderate 
profit, securing a contract where bids are required. It is 
fortunate for these that many contracts are placed without 
requiring bids. Not only would accurate cost keeping pre- 
vent this demoralization of business, but it points the way to 
more efficient production. 

WHY ARE THERE SO FEW ACCURATE COST SYSTEMS? 

The present condition of affairs is difficult to explain, as 
competition is keen and the American manufacturer is pro- 
gressive. In many cases the owner or manager has risen 
from his tools and his success is due to his intimate knowledge 
of the work and his ability to direct shop operations. When 
the plant was small he figured his own costs and made his esti- 
mates for new work. With his ability and his intimate 
knowledge of every detail of the work he was able to do 
this with considerable accuracy. His plant has now grown 
beyond the one-man stage. The costs are kept by men who 
have no shop experience, and estimates for new work are 
made by men who have neither the experience nor the afftlity 
of the manager and are based on the cost records of previ- 
ous similar work. The manager does not realize that his 
subordinates cannot with the same machinery produce the 
results that he obtained. He also forgets that the times have 
changed and that keen competition requires that his cost rec- 
ords should clearly show him how every penny is expended. 
In his day in the shops there were no elaborate cost systems, 
and he can see no need for such systems now. He has been 
progressive in keeping his plant supplied with up-to-date ma- 
chine tools ; this is his line and he sees the benefits to be 
derived from modern plant equipment. He is out of date 



6 COST KEEPING AND SCIENTIFIC MANAGEMENT 

with his cost system ; this is not his line and he cannot see 
the benefits to be obtained. He cannot realize that one is 
fully as important as the other. 

Sometimes a manager erroneously believes himself to be 
progressive regarding his cost records. He has read some- 
thing on cost keeping and has heard a discussion of the im- 
portance of the subject at the last meeting of his technical 
society. He decides that he will improve his methods and 
directs his secretary or bookkeeper to put in a modern sys- 
tem. The latter has made no special study of the subject, and 
after getting the information that he can obtain from nearby 
plants and securing some of their blank forms he makes a 
number of changes and perhaps secures somewhat better re- 
sults. Frequently, however, no improvement is made in the 
accuracy of the results, and the shops are required to make a 
number of useless reports. The secretary reports progress 
to the manager, and points out the advantages of his system 
over that of a nearby competitor. If the manager were try- 
ing new methods in the shop he would not be satisfied with 
general reports. He Would see for himself exactly the 
changes made and the results obtained. He, however, is lit- 
tle interested in accounting and knows but little of cost keep- 
ing, and he accepts the statements of his secretary and is satis- 
fied, while in reality little or no improvement has been made. 

Some owners and managers who have been impressed with 
the value of accurate costs, and see the necessity for improve- 
ment in their cost systems, have employed expert accountants 
to install a cost system, who have had no shop experience and 
who have no knowledge of shop methods. This has resulted 
in a system entirely unsuited to the business, which has 
brought endless red tape without producing results. 

COST KEEPING VERSUS ACCOUNTING. 

There is a line, faint, perhaps, but nevertheless a dividing 
line, between cost keeping and accounting. Cost keeping is 
only concerned in placing in the most direct way the cost of 
every element that goes to make the total cost of the product. 



THE IMPORTANCE OF ACCURATE COSTS 7 

These costs should be so recorded that the manager can 
readily discover all excessive costs, whether they be direct 
costs or an element of the expense burden. Accounting be- 
gins where cost keeping leaves off. The preparation and in- 
stallation of a cost system is the work of a shop expert who 
has made a study of the application of simple accounting to 
shop methods. Scientific shop management and accurate 
cost keeping are inseparable. Scientific management cannot 
exist without accurate costs. The methods followed in ob- 
taining good management in the shops are closely interwoven 
with the methods employed to secure accurate costs. Costs 
are a means to secure a certain definite end, and the most 
important function of costs is to aid in securing better man- 
agement, greater efficiency, and a reduction in the cost of 
manufacture. 

The shop organizer knows exactly the form in which costs 
will give the greatest aid. He is not interested in costs as 
costs, but only as a step to secure better results. He knows 
what is really required and what is useless. He knows 
whether the routine required to secure certain data will retard 
the production of work or not. In other words, he has a 
comprehensive view of the whole subject and is able to reject 
all that is of no value in securing the end for which he is 
striving, that is, the greatest efficiency and the lowest produc- 
tion cost. 

An expert accountant has no such view of the subject. He 
does not know what will aid in the reduction of costs and 
that which will not. He does not know the form in which 
costs can best be used in producing efficiency. He is only 
interested in costs as such. He has no knowledge of the 
actual work and has no interest in it. He will require rec- 
ords which cost much to obtain, which interfere with the 
operation of the work and which serve no useful purpose in 
increasing efficiency after they are secured. 

An expert on shop management can learn the simple ac- 
counting required in a very short time. In fact, he cannot 
be an expert without this knowledge. An expert accountant 



8 COST KEEPING AND SCIENTIFIC MANAGEMENT 

cannot learn shop methods and shop conditions in years. 
An expert shop organizer will not undertake the reorganiza- 
tion and improvement of a plant unless he is allowed to 
devise and install the cost system. He knows that any at- 
tempt to use a cost system which does not dovetail with his 
shop methods will greatly retard his work in producing greater 
efficiency. The employment of an expert accountant to de- 
vise and install a cost system in a manufacturing and re- 
pairing plant is an absurdity. Yet this mistake has been 
made by many and the results are almost invariably unsat- 
isfactory. 

COST SYSTEMS SECRET AND NOT SUBJECT TO CRITICISM. 

The manufacturer who closes his shop to visitors soon 
finds himself behind the times. The exchange of ideas and 
criticism among manufacturers assists in advancement. Some 
years ago many manufacturers did not welcome visitors, but 
now a progressive manager welcomes a competitive man- 
ager and gives up his time to show him the plant, and both 
gain by such visits. This condition does not obtain regard- 
ing the cost system, and it is very rare for a manager to 
permit a competitor to examine his cost system, nor does he 
desire to explain the methods followed. The cost system 
is, therefore, not subjected to criticism, and managers and 
owners are ignorant of glaring defects which would be 
brought to light if secret methods were not employed. It 
is curious that nearly all managers believe that they have 
very satisfactory cost systems, and the worst are usually 
described as " simple and effective." 

Less secrecy will bring about the downfall of many cost 
clerks, but will also improve the accuracy of costs. 

VALUE OF ACCURATE COST KEEPING FREQUENTLY NOT REAL- 
IZED BY SUCCESSFUL MANAGERS. 

Many successful managers do not know the value of ac- 
curate costs. They know the necessity for the total cost 
to fix the selling price of manufactured articles, but they do 



THE IMPORTANCE OF ACCURATE COSTS 9 

not know that well-kept costs will point the way for greater 
efficiency in production and a consequent reduction in costs. 
The successful manager as he advanced from his tools to 
foreman and from foreman to superintendent was employed 
in plants much smaller than the present-day plants. As he 
advanced in the supervisory positions he had absolute con- 
trol of every operation. He knew the ability of each man 
under him. He was quick to see every extravagance, every 
lost moment of time, every leak, and he was quick to apply 
corrective measures. It was these qualities that made him 
manager or owner of the large plant that he now controls. 

He expects his subordinates — his department heads — to 
do as he did. He forgets that the work is more exacting, 
that the department heads have more sub-departments, more 
men. He forgets that these department heads frequently 
have not his ability, and that many extravagances, many 
leaks, will not be remedied. Such a manager should pro- 
vide the necessary machinery to point the way for improve- 
ments, and establish a check on subordinate officials. A 
well-devised, accurate cost system is the machinery required. 

In the report of the committee of the National Machine 
Tool Builders' Association the following statement is made : 
" The day will come when no manufacturer who has a per- 
manent and growing success can have that success without 
a complete and accurate cost system. And such a system 
will be as essential in the business of manufacture as a 
good superintendent and a good organizer and good work- 
men." 

CAN AN ESTABLISHMENT MAKE MONEY WITHOUT A GOOD COST 

SYSTEM ? 

The question naturally arises, are not many of the con- 
cerns which are without good cost systems making money? 
Undoubtedly they are, but how often do we see a shop with 
antiquated machinery making money? Owing to other ad- 
vantages this is done in spite of the inferior plant equipment. 
If the same shop had modern tools it would make much 



10 COST KEEPING AND SCIENTIFIC MANAGEMENT 

more money. The same is true of the cost system. The 
manufacturer who once gets an accurate cost system will 
never give it up. He considers it far more important than 
his best machine tools. The shop that is making money 
without a cost system is depending almost entirely on the 
good judgment of its manager and superintendent, and luck. 
Oftentimes the manager and superintendent must guess when 
they should know. Give these same men the facts that are 
given by accurate costs — give them an accurate record of 
what is taking place in the plant, as shown by a proper cost 
system — and they can apply their judgment to much better 
effect. Knowledge then takes the place of guesswork. 



CHAPTER II 
The- Purposes of a Cost System 

There is a remarkable lack of interest on the part of many 
owners and managers in accurate cost accounting. Approach 
a manager to tell him of a new tool or appliance which 
will reduce the cost of production and he is immediately inter- 
ested. He listens to the explanation of the new machine 
and if it appears to have merit he investigates its applica- 
tion to his work, and if he sees that the reduction that can 
be made in production costs warrants the outlay, he will 
purchase. Not a few managers employ outside experts to 
study the products of the concern and the methods of manu- 
facture in order that better suited machine tools may be 
provided or better appliances devised. The manager knows 
that these methods mean progress; that by them greater 
efficiency is obtained and the cost of production reduced. 
This increases profits and he is not only interested because 
of the pecuniary reward, but also because increased profits 
mean success. 

Nearly all men are more interested in what the world 
calls success than in the pecuniary rewards that come with 
success. To the majority of men the striving for success and 
its attainment makes life worth living. 

It is very different in regard to suggested improvements 
in the cost system. To many managers detail cost figures 
are not an essential part of the system that brings success. 
To a great many, costs are mere data — the record of what 
is past and gone. To such, costs are a necessary evil — 
necessary in that they are required to tell whether the man- 
ager has failed or succeeded, and this to many is told only 
by the final balance. 

Very few managers can tell how their costs are kept. 

II 



12 COST KEEPING AND SCIENTIFIC MANAGEMENT 

They can tell in detail every operation in the shops, because 
they know the importance of these and are interested. They 
do not know the value and importance of costs and they are 
not interested. They leave the cost keeping to the book- 
keeper and the cost clerk. They consider this a detail of the 
organization that can well be left to poorly paid clerks. In- 
terest in scientific shop management will bring intelligent in- 
terest in costs, for scientific management cannot exist without 
accurate costs. An organizer cannot intelligently organize 
unless he knows conditions, and an accurate cost system is an 
exact record of the conditions. It is the pulse of the organ- 
ization and every beat that is out of harmony in the organiza- 
tion is faithfully recorded. 

LITTLE LITERATURE ON COST SYSTEMS FOR MANUFACTURING 
ESTABLISHMENTS. 

A manager who desires to obtain satisfactory literature 
on cost accounting as applied to manufacture and repair 
shops may make a wide search and still not be well rewarded. 
He will find a large number of books on accounting, many 
of which are excellent, as commercial accounting has re- 
ceived wide attention and has been carefully considered by 
experts. In nearly all of these books there are a few chap- 
ters on cost keeping for manufacturing concerns, but the 
treatment of this subject is not satisfactory. It is treated 
from the point of view of the expert accountant, and this 
is not the same as that of the progressive manufacturer or 
the expert shop organizer. The subject is considered in an 
academic way, and the methods suggested have not been 
worked out in detail and applied to a manufacturing con- 
cern. There is, however, much to be learned by the pro- 
gressive manufacturer from these excellent treatises on com- 
mercial accounting, and he will do well to study carefully 
the principles of accounting, as the information gained will 
be of great assistance in devising a correct cost system. 

It is seldom that a paper on cost methods is presented 



THE PURPOSES OF A COST SYSTEM 1 3 

to an engineering society. Many members believe that such 
papers have no place in the records of the society. The) 
do not consider cost accounting a technical subject, or a 
part of their profession. They consider that this is work 
of bookkeepers and not engineers. If, by chance, a paper 
on this subject is presented, it does not excite general interest 
and the intelligent discussion is confined to a comparatively 
few members. 

In the technical journals every small improvement in 
plant equipment is fully described and improved methods 
are discussed in detail, while little space is given to improve- 
ments in cost systems, and it is seldom that a comprehensive 
article on this subject is found. 

The lack of information in the technical press on this im- 
portant subject is due entirely to the lack of general interest 
in the subject on the part of engineers, managers and owners. 
The technical press is very much like the modern news- 
paper — it publishes what its readers want — that which 
they demand. 

WHAT CAN BE LEARNED FROM A PROPER COST SYSTEM? 

Every operation of the plant can be read from the cost 
figures. The costs day by day represent actual work — 
actual progress of each job toward completion. In a proper 
system these costs are so recorded that a manager or his 
assistant can ascertain from the office what is taking place 
in the plant. He sees whether or not a rush order is re- 
ceiving proper attention, and knowing the approximate total 
cost for direct labor, can tell whether at the present rate the 
job will be completed in the promised time. He can tell 
whether all departments are proceeding as they should to 
make the many parts come together at the same time for final 
assembly. 

With his knowledge of the job he knows the department 
which must take up the work first, and approximately how 
much must be done before the work can be delivered to the 



14 COST KEEPING AND SCIENTIFIC MANAGEMENT 

next department. He knows how much preliminary work 
can be done by the second department to enable it to proceed 
rapidly when the product of the first is obtained. 

With his knowledge of the work itself and with the daily 
records of the direct labor conveniently recorded by shops 
and trades he can tell exactly the progress made in each de- 
partment. 

Many will say that this can be learned from the shops and 
that the shop is the place to obtain this information. The 
information can be obtained from the shops, but to do so 
the job must be followed from shop to shop and perhaps 
from machine to machine. Few managers have the time 
to do this. In their rounds through the shops many affairs 
occupy their attention and they have little time to follow a 
job in this manner. It is often in the office that a manager 
has a job of work brought to his attention and wishes to 
know what has been accomplished in each department. To 
telephone to each department head for this information is 
unsatisfactory. If he can obtain the information from the 
cost cards he is in a position to study the job as a whole and 
plan his actions. 

By means of the cost system under which I lately operated, 
the direct labor costs are accurately recorded and so arranged 
that each day the costs by shops or trades can quickly be 
obtained. Each of my assistants received the job-order 
cards of the work under his supervision at 4 p. m. every 
day. Many of these cards receive but superficial examina- 
tion, but those for important work receive careful scru- 
tiny. First, the totals of the direct labor costs are known 
and with general knowledge of the progress of the work the 
efficiency of operation is measured. The estimated cost of 
each job is given on the card and it is therefore known how 
much money remains of the direct labor estimate with which 
to complete the work. The jobs that have overrun the esti- 
mates, or are in danger of overrunning, are picked out and in- 
vestigated and the reasons for this condition determined. 



THE PURPOSES OF A COST SYSTEM 1 5 

This brings forth better supervision on the part of foremen 
of what might be called the dangerous jobs. 

The progress of the work in each department can be ap- 
proximately determined and departments that are behind can 
be accelerated. For example, in a large pipe job, the charges 
show that the pipe shop has made material progress while 
the foundry has done little or nothing. Before the work can 
be completed the flanges and fittings must be cast in the 
foundry and machined in the machine shop. Either the pipe 
shop is too fast or the foundry is slow. A note is made of 
this job and the conditions investigated the following day. 
The accuracy of charges against jobs is also tested. On a 
number of jobs the assistant knows exactly the men who 
worked the previous day and with this knowledge checks the 
charges made against the job order. In actual practice it 
was found necessary each day to issue a considerable number 
of memoranda to foremen asking for explanations or giving 
suggestions and directions. 

It has been found convenient to go over the job-order cards 
after the usual working hours when this can be done undis- 
turbed, and to dictate the notes regarding the work to a 
dictating machine, to be written and sent out the following 
morning. This use of costs gives a manager and his as- 
sistants a much better grasp of the situation, puts the man- 
ager in closer touch with the work, and brings each day 
to his attention important facts which otherwise might es- 
cape him. 

The notes that I make from the afternoon scrutiny of 
the job-order cards have been of great value in planning the 
following day's work. Frequently on Sundays or at night 
I go over the job-order cards of the important work. At these 
times I am undisturbed and devote my whole attention to 
a study of conditions as shown by the cost records. In 
these days of competition there are few managers who do 
not sometimes find it necessary to study the operation of 
the plant outside of working hours. At these times the cost 



l6 COST KEEPING AND SCIENTIFIC MANAGEMENT 

records should supply the necessary information. Accurate 
costs properly recorded are the sign boards pointing directly 
to inefficient methods and inefficient service. 

There is another important benefit to be derived from this 
use of costs. The working force soon knows that the his- 
tory of each department is recorded by the costs, and that 
each day the story is told to the responsible head, and that 
any dereliction will be immediately noted and corrective meas- 
ures applied. This knowledge brings forth better supervision 
on the part of superintendents and foremen, and better ef- 
forts on the part of workmen, and consequently increases 
efficiency. Every manager knows that when the cost of a 
job is watched day by day the total cost will be much less 
than if the work had not received this attention. Nearly 
every manager has at some time watched the cost of a job 
in which he is particularly interested and he knows that his 
watchfulness has brought excellent results. Then, why is 
any argument needed to strengthen the plea to watch all costs 
in the same manner? 

To do this a system must be provided which presents true 
costs in a convenient form so that the figures may be readily 
analyzed. 

It is true that in a large establishment with many job 
orders it will be impossible for the manager to go over the 
cards for each job. He has assistants who can do this, and 
these will bring to his attention all important matters and 
all exceptions which they are unable to handle. 

While the above described daily scrutiny of cost by job 
orders refers to direct labor costs, it must not be inferred 
that the material charges should not receive attention. The 
cost-of-work cards show the charges for labor, material and 
indirect expenses. These are recorded by months, the labor 
being taken from the job-order cards, the material from the 
storekeepers' bills, and the indirect from the expense-dis- 
tribution sheet. These should be scrutinized not less than 
once a month. 

I have found these uses of costs to be of the greatest as- 



THE PURPOSES OF A COST SYSTEM \J 

sistance in an organization employing 1,500 to 2,000 men, dis- 
tributed in a number of shops. There is little doubt that 
similar use will be of benefit in a smaller plant. 

MANAGER SCRUTINIZES EACH MONTH ALL INDIRECT CHARGES. 

With a proper system of costs there will be presented to 
the manager each month a complete analysis of all of -the 
indirect charges. This will show for each shop the indirect 
charges under appropriate heads and the total shop expense. 
The general expenses will also be shown in a similar manner. 
The productive labor in each shop should also be shown and 
the proportion of each expense to productive labor given. 
The distribution of the expense burden to the output should 
also be given. By means of parallel columns, or better, by 
means of curves, each of the various factors should be plotted 
by months, so that the manager can see at a glance whether 
the tendency of each expense is up or down. With this in- 
formation the manager can see exactly where the money 
for the expense burden goes. He will note that one item 
of expense is very large, but he knows the reason. There 
has been a breakdown which involved a large expenditure for 
repairs. He notes another item which is higher than usual, 
and for which he does not know the reason. He checks 
this item for a detail of labor and material. Thus, he goes 
through the monthly expense reports, noting exceptions for 
further details. These details are prepared for him and 
unless they show to his satisfaction that the extra expendi- 
ture is warranted he is in a position to take up the question 
with the department head and will require satisfactory ex- 
planation or apply corrective measures. 

He can at various times take up the expenses shop by 
shop, item by item, and have a complete analysis and detail 
study made to see if the expense for this shop can be re- 
duced without reducing the output or without injury to the 
plant equipment. This is not only for the purpose of stop- 
ping leaks, but also for devising better methods or better ap- 
pliances. In this, as in all other work, it will be found thai 



l8 COST KEEPING AND SCIENTIFIC MANAGEMENT 

when it is studied in detail and systematized the expenditures 
can be materially reduced without injury to the plant or 
without reducing the output. By such a system of costs 
the manager is not only able to see clearly the operation 
of the plant, but the leaks and deficiencies stand out and he 
can apply the remedy. He is armed with absolute knowledge 
and does not have to guess ; when he calls for an explana- 
tion from a subordinate it will be useless for the subordinate 
to attempt to evade or bluff, for now the manager knows. 

MONTHLY BALANCE DESIRABLE. 

Very few manufacturing establishments and practically no 
repair shops make a monthly balance. There is no neces- 
sity for waiting until the end of the year to determine if the 
concern is making or losing money. This can and should 
be known at the end of each month. A proper cost and 
accounting system shows this and there can be no question 
that the concern with this information is in a far stronger 
position than one without it. To obtain a monthly balance 
in an establishment like a shipyard, where large contracts 
are taken which require several years to complete, it is neces- 
sary that an estimate be made each month of the value of the 
output on such contracts. Practically all contracts of this 
kind are paid for as the work progresses, as no firm cares 
to finance a five-million-dollar contract. This requires that 
from time to time careful estimates, based on the total con- 
tract price, shall be made on the value of the work accom- 
plished, in order that payments may be obtained. These 
estimates are carefully checked by the purchaser and are us- 
ually conservative. The same system may be employed to 
show each month the value of the work accomplished on each 
large contract. 

The monthly balance is another case of a proper system 
giving information that is well worth while, information 
which prevents the manager from acting in the dark. It is 
also of value to the owner or the board of directors in a 
stock company. Sometimes owners or directors are in igno- 



THE PURPOSES OF A COST SYSTEM 19 

ranee of the actual conditions and believe that large divi- 
dends are being earned when such is not the case. This 
condition is not unusual when a concern is principally en- 
gaged in executing large contracts which require several years 
to complete. A manager may obtain at low prices a num- 
ber of such orders and the concern has every appearance of 
prosperity, and the owner is led to believe that large profits 
will be secured when the contracts are completed. Without 
an accurate cost system there is no way by which the esti- 
mates made by the manager can be checked, other than to 
engage an expert to go over the work in detail and estimate 
the value, and compare this with the expenditures ; but the 
owner has no reason to consider such action necessary. When 
the work is completed, instead of profits there are enormous 
losses. This case is by no means an extreme one and at 
least one large manufacturer can testify to the correctness of 
the statement. 

Purchasers of large properties may be deceived in the 
same manner and under the veil of apparent prosperity losing 
establishments are sometimes sold at very advantageous 
terms. No doubt some of my readers have better knowl- 
edge than I of the losses due to buying under these con- 
ditions. These regret that accurate cost keeping and account- 
ing were not more general, or at least were not employed in 
these plants, for such operations would have then been im- 
possible. 

DIVIDENDS THAT ARE PAID FROM CAPITAL AND NOT FROM 

PROFITS. 

A proper cost system shows the actual profits, but fre- 
quently with the systems in use the records show profits 
which are not real. In many concerns, particularly the small 
establishments, in arriving at costs no account is taken of 
depreciation, or if it is considered, the allowance made is 
inadequate. In these cases the profits shown are apparent 
and not real. The owners, however, do not realize that the 
dividends which they receive are at least partly derived from 



20 COST KEEPING AND SCIENTIFIC MANAGEMENT 

the principal and not from profits. This subject will be dis- 
cussed in more detail in a subsequent chapter. 

Few concerns know whether or not every line they make 
and sell is a money maker. They cannot know with their 
present cost system. Is this good business ? Surely not ! 
Many, however, depend on the cost system to show a profit 
or loss at the end of the year, and are satisfied if a sub- 
stantial profit is shown. These are neglecting their oppor- 
tunities. Oftentimes one product should show a substantial 
loss which is made up by large profits on the others. A 
proper cost system will show the profits on each line. If 
the losses on the losing line cannot be turned into a profit by 
improved efficiency, then that line should be abandoned and 
all energy concentrated on the profitable lines. 

In some foundries costs are kept, and selling prices are 
fixed on a tonnage basis. The costs of large simple castings 
are averaged with those of the small difficult ones. It is 
hardly necessary to point out that the selling prices of the 
large castings are too high while the small are too low. If 
it is known to buyers that costs are kept in this way orders 
for small castings will be plentiful. 

I know of one large concern that places its orders for 
castings in this manner. The small and medium-sized cast- 
ings go to the concern where costs are averaged, while all 
of the larger castings go to another where costs are properly 
kept. 

I recently visited a shop that used a number of small steel 
castings weighing less than a pound each, and learned that 
they were obtained at ten cents a pound. The foundry that 
made these is a small plant using the Tropenas process. The 
cost records were of no value in fixing selling prices, and many 
orders were taken at an actual loss. This steel plant went 
out of business. 



THE PURPOSES OF A COST SYSTEM 2 L 



A large concern usually consists of many departments. 
Is each of these a money-maker? Is each shop efficient? 
If not, can it be made efficient"? These are important ques- 
tions and every capable manager wants satisfactory answers, 
and he should have them to manage the establishment prop- 
erly. Let managers ask these questions, and few will re- 
ceive satisfactory replies, although a proper cost system 
provides the data. 

In some of the large establishments with numerous shops 
the expense burden is averaged and applied on the basis of 
productive labor — notwithstanding the fact that in one shop 
the shop expense percentage is nearly a hundred while in 
another it is less than twenty-five. Frequently such estab- 
lishments are called on to bid for work which is almost exclu- 
sively confined to the shops where the expense is low, and 
by using the higher average rate the bids are high and the 
work goes to other establishments where costs are more ac- 
curately determined. Thus profitable work is often lost. 
Sometimes the establishment which is known to be better 
equipped and more efficient loses in this way to the poorly- 
equipped, inefficient shop, and the latter makes money. I 
know of at leas* one establishment which lost so many profita- 
ble repair jobs in this manner as to cause general comment, 
yet apparently the real cause was not known to those in au- 
thority. 

WHAT IS GOOD JUDGMENT? 

A great deal is heard of good judgment, and men who 
possess this quality command high salaries. Often an es- 
tablishment which has secured such a man depends almost 
entirely on his " good judgment " for better results, and 
it is considered that with this he can overcome the lack of 
organization, cost system, or even of plant equipment. 

A good mechanic to produce the best work quickly must 
have good tools with which to work. If he is not given 



22 COST KEEPING AND SCIENTIFIC MANAGEMENT 

these a less efficient man with better tools can produce better 
results. The same applies to the manager. A manager with 
good judgment is extremely valuable, but he must have the 
tools with which to work. If he does not obtain them a 
man of less ability with better organization and better equip- 
ment will outdistance him. 

Good judgment is the application of knowledge gained 
by experience. This is derived partly by direct observa- 
tion and partly from statistics compiled by others which 
have been digested and the salient points retained. If the 
manager is really a man of " good judgment " he will pro- 
vide himself with the organization and the system which will 
furnish him with correct information. An accurate cost sys- 
tem is an essential part of such an organization. 



CHAPTER III 
The Various Elements of Cost 

It is well to admit, before going into the subject in detail, 
that from the point of view of the manager it is impracticable 
to obtain costs that are scientifically accurate. To obtain 
such costs will require machinery so complex that the real 
reason for the existence of the factory, that is, the produc- 
tion of work at a cost which will permit it to be sold at a 
profit, may be lost sight of in striving for scientifically ac- 
curate records. 

In a few words, the purpose of costs is twofold : The 
first is to furnish the cost of the products so that the selling 
price can be fixed, or if the selling price is fixed by competi- 
tion, to determine if the product can be manufactured at a 
profit. The second is for the benefit of the manager, to show 
him where economies may be effected. 

An information which is useful for these two purposes is 
valuable and should be obtained if this can be done without 
excessive cost or disadvantages which outweigh the advan- 
tages. Reports and data which do not serve either of these 
ends are useless, an unnecessary expense, and may by their 
complication and multiplicity of detail obscure the real ob- 
jects sought. 

In the present day, with the systems of shop management 
which are most generally used, it is not possible to obtain 
costs with the degree of accuracy that is believed neces- 
sary by many progressive managers, but with advance- 
ment in shop management there wiU be corresponding ad- 
vancement in the degree of accuracy of costs. I believe that 
the day is not far distant when scientific shop management 
will be almost universal and when that day comes, costs 

23 



24 COST KEEPING AND SCIENTIFIC MANAGEMENT 

which are approximately scientifically correct will not only 
be possible, but the rule. 

In the meantime great improvement can be made in ex- 
isting methods, and it is my purpose to attempt to point out 
defects in methods frequently followed, and to attempt to 
describe methods which will give more accurate results, and at 
the same time not require an undue amount of clerical labor. 
The most important object sought, however, is to arouse in- 
terest among engineers, owners and managers in the im- 
portance of improvement in the accuracy of cost records. 

Production costs consist of direct labor, direct material, 
and the indirect costs. It is difficult to give a general, but 
rigid, definition of these elements, but in each system at least 
there must be a rigid definition if accuracy is to be attained. 

DIRECT LABOR. 

Direct labor is often called productive labor, and is de- 
fined as all labor which is employed directly in the produc- 
tion of the output, as distinguished from labor indirectly 
employed on output. A machinist running a lathe turning 
a crank shaft for an engine under construction is clearly 
performing productive or direct labor, while the engine 
tender in the power plant is classed as performing un- 
productive or indirect labor. There is, however, much 
labor which is not so clearly defined. There is labor 
which is directly employed on output, but as it is employed 
for varying periods during the day on a large number of 
different jobs, each of which receives but a few minutes 
of time, it is impracticable to charge the time direct to each 
job. In a large establishment many cases of this kind can 
be found, for example: A general helper or laborer em- 
ployed in a machine shop or foundry who is called on to 
assist in many jobs during the day; a machine hand in a 
jobbing wood-working shop or pattern shop running several 
machines, may work on fifty jobs during the day; a man 
employed as a " move man " to move work from one machine 
to another, etc. With the shop organization that is almost uni- 



THE VARIOUS . ELEMENTS OF COST 25 

versal it is impossible to correctly charge these men directly 
to the work on which they are engaged. Any attempt to do 
so will usually result in the large jobs getting nearly all the 
charges while the many small jobs get none. 

In many shops where some attention is given to shop- 
expense costs, and a more or less blind effort is made to re- 
duce these expenses, the result will be that the time of such 
men is divided up by the foreman and charged direct to a few 
large jobs. It is far better to recognize the fact that this 
miscellaneous labor engaged directly on output cannot under 
present conditions be accurately charged to the output, and 
should be charged as indirect labor. 

Frequently some of the supervisory force are engaged ex- 
clusively on one large job, and there are many arguments for 
charging such men direct to the job. In fact, I know of very 
few who advocate charging such men otherwise. For ex- 
ample, one sub- foreman has entire charge under the foreman 
of the erection of a large engine on the erecting slab; or 
an assistant foreman, himself with an assistant, has charge 
of retubing the boilers of a large ship. As these are ex- 
clusively engaged on the one job, at first thought it would 
seem proper to charge these direct to the work which has the 
benefit of their services, and this is the usual practice. 

On the other hand, when a sub- foreman is engaged at the 
same time in the supervision of a number of jobs, his time 
is charged to the indirect order for supervision. Under this 
system the large jobs mentioned not only pay for their own 
supervision, but also help to pay for the supervision of other 
work where the supervisory force is charged to an expense 
order and pro-rated. 

Another important objection to this method is that it im- 
pairs the accuracy of the records. There is an order num- 
ber in the expense accounts for the shop supervision, and the 
manager desires each month to know exactly the cost of 
this supervision. By the usual method this cannot be told, 
and the comparisons made of the monthly expenditures are 
of little value, as one month all of the shop supervisory 



26 COST KEEPING AND SCIENTIFIC MANAGEMENT 

force is charged to the supervision number, while the next 
month much of this cost may be hidden in the direct-labor 
costs. The supervisory force should never be charged direct 
to a job, but should always be charged to the supervision 
number. This, how T ever, does not apply to the supervisory 
force of an erection gang away from the plant, employed ex- 
clusively on one job. In this case the supervisory force is 
charged direct to the job and this job does not receive any 
part of the expense of shop supervision. 

This not only refers to foremen, assistant foremen, gang 
bosses, etc., who are regularly classed as supervisory, but 
also to mechanics who are acting in a supervisory capacity 
and who are in the shop termed " straw bosses." This method 
increases the shop-expense charges, and on this account is 
objectionable to many, but if cost records are to be used to 
their full value, the system must be as rigid as possible, and 
the costs which are compared must always be for the same 
object or the same service. 

Under these conditions it is necessary to define direct labor 
as the labor employed in the production of output, which it 
is practicable to charge direct to production orders, and does 
not include labor which, under the cost system used, should be 
charged to supervision, miscellaneous labor, or other over- 
head orders. 

IMPORTANCE OF ACCURACY IN OBTAINING " DIRECT-LABOR 

CHARGES." 

It is of the greatest importance to secure accurate direct- 
labor charges. This is true not only on account of the im- 
portance of these charges in themselves, but in the great ma- 
jority of the shops the overhead charges are pro-rated to 
the different jobs on the basis of direct labor, and inaccuracies 
in these charges vitiate the accuracy of the distribution of 
the burden. In the case cited above, relative to charging cer- 
tain supervision direct to production orders, not only do 
these orders pay for supervision of other work, but by in- 
creasing the direct-labor charge the order is made to pay 



THE VARIOUS ELEMENTS OF COST 2J 

for more than its share of all of the overhead charges. It 
is generally conceded that the best means of securing cor- 
rect labor charges is by means of the individual service card, 
or time ticket, as it is sometimes called. A separate card 
is used for each job on which a man works. In the best or- 
ganization these cards are made for the workman, and he has 
only to enter the time he starts and stops a job, and in some 
shops this is done by means of clocks. The total time 
charged to jobs must equal the payroll time of the employees. 

DIRECT MATERIAL. 

Direct material has been defined as the material that en- 
ters in and forms a part of the product manufactured. This 
definition is not exact. Like direct labor there is some ma- 
terial that enters into the product that cannot be charged as 
direct material, but must be charged indirectly : glue used in 
a joiner shop or pattern shop; a few nails or screws used on 
a repair job; a small amount of solder on sheet-metal 
work; a few cotter pins on a job in the machine shop; 
the red lead or litharge used in making joints; the material 
used with the oxy-acetylene welding plant, and many other 
similar items. On account of the difficulty of measuring 
the quantity used of some of this material and the small 
amounts used of other classes, it is impracticable to charge 
these direct, and they must be included in the indirect charges. 
Direct material must, therefore, be defined as the material 
which enters in the product that it is practicable to charge 
direct. 

Much more care than is usually the case should be given 
to the custody of material and to the charges for material 
used. Many managers are very particular regarding the 
charges for labor, while they give but little attention to the. 
charges for material. They insist that the total of the pay- 
roll must balance with the labor charged to the various or- 
ders, but they make no effort to balance the material charges. 
In many establishments much material is stored in the shop, 
and in some cases is free to all. When this is the case it 



28 COST KEEPING AND SCIENTIFIC MANAGEMENT 

is inevitable that material will be used and not charged to 
the job. Under these conditions there is also considerable 
waste, due to loss and pilfering. Scrap material which has 
been left over from a previous job is frequently used without 
charge or credit. Except in strictly manufacturing estab- 
lishments it is rare that the material actually used will check 
with the charges made. 

There should be strict accountability for all material, and 
this cannot be accomplished without a rigid store-keeping 
system. To store all material, however, in a storehouse and 
send there every time minor miscellaneous material is re- 
quired, is a mistake. Not only will such a system cause 
much costly delay, but it will also force a foreman to acquire 
surreptitiously a small stock in the shop not on charge on the 
books. 

In addition to the storehouse there should be established 
in each shop a well-arranged stock room in which is kept a 
small stock of miscellaneous minor materials required to meet 
immediate demands of the shop. In the small shops this 
can be maintained in connection with the tool room. There 
should, however, be rigid accountability for this material. 
Regular stock cards should be maintained and the stock 
should be frequently inventoried. All material issued for a 
job which is not used should be returned to the store and the 
job credited. No material should be allowed in the shop un-- 
less it has been drawn for work under way. 

I have no doubt that eventually in all but small jobbing 
shops the bill of material required for every job that can be 
charged direct will be prepared in the office when the work 
is planned, and ordered from the store before the work is 
begun. This is now done in some establishments, but is by 
no means general. There is much that can be done to in- 
sure correct material charges, and if managers will give this 
subject one-tenth of the attention that they give to labor, 
large savings will be effected, and the cost records will be 
more accurate. 



THE VARIOUS ELEMENTS OE COST 20, 

INDIRECT COST. 

The indirect costs are generally called " expense charges," 
" expense burden," or " overhead expenses." These terms 
are unfortunate, as they give the idea that they cover the 
cost of the administration and upkeep of the establishment, 
and nothing else. From the definitions of direct labor and 
direct material, it can be seen that both labor and material 
employed directly in product are included in the indirect 
costs, although not in any way a part of the expenses of the 
establishment. 

In a foundry doing jobbing work, for example, it is an 
impossibility to accurately charge the helpers directly to the 
work, and these are usually charged to the indirect order for 
miscellaneous labor, yet they are engaged entirely on produc- 
tive work. The sooner managers and others get away from 
the idea that the percentage of indirect costs to the direct 
labor is a measure of the efficiency _ of the establishment, the 
quicker will there be obtained accurate cost records, and what 
is still more important, the quicker shall we obtain increased 
efficiency. The measure of efficiency of an establishment is 
the total cost of the product, not a part of the cost, and the 
indirect charges are but a part of the costs. 

Indirect costs may be defined as the element of the total 
factory cost of the product which it is not practicable to charge 
as either direct labor or direct material. 

TOTAL FACTORY COST. 

The sum of the direct labor, direct material, and indirect 
cost is the total factory cost. To obtain the total cost there 
must be added to the factory cost the selling expense. The 
selling cost should be kept entirely separate from the factory 
cost in order that the efficiency of both the factory and the sales 
department may be accurately determined. Not only should 
the sales department be charged with the expense of adver- 
tising, salesmen, etc., but this department should bear its 
proper proportion of the general expenses, and should be 



30 COST KEEPING AND SCIENTIFIC MANAGEMENT 

charged with the work done by the estimating department for 
the benefit of sales. 

ELEMENTS^ OF THE INDIRECT COSTS. 

The principal elements of the indirect costs are : Ex- 
penses of administration; miscellaneous labor and material 
which it is impracticable to charge direct to product; interest 
on money invested and rent ; depreciation, both from age and 
use; upkeep of plant; taxes; insurance, fire, accident and cas- 
ualty; heat, light and power. 

Some of these expenses are well understood and require 
no explanation, but others are not understood in the average 
establishment and before accurate costs can be obtained all 
must be understood and their importance realized. 

DEPRECIATION. 

It cannot be considered strange that little is known in the 
average shop regarding depreciation when there is so much 
ignorance regarding this element of cost in quarters where one 
would expect to find knowledge. 

In many courts throughout the country it has been decided 
that depreciation is not an element of cost and should not be 
charged against income. Hatfield quotes a decision in a 
California court in which the judge decided that a charge of 
depreciation against income was " all wrong " and " not to 
be tolerated for a moment." Hatfield also states that some 
years ago the Supreme Court of the United States held, re- 
garding depreciation : " We are clearly of the opinion that it 
is not a proper charge. Only such expenditures as are actu- 
ally made can with any propriety be claimed as a deduction 
from earnings." On the other hand, the Statutes of Ger- 
many, France, Belgium, Switzerland and Austria require that 
depreciation must be charged before profits can be paid. The 
courts of England have also almost always held that deprecia- 
tion must be considered, and this has been the ruling in many 
states in this country. The most important recent ruling is 
that of the Interstate Commerce Commission that an allow- 



THE VARIOUS ELEMENTS OF COST 3 1 

ance must be made for the depreciation of the equipment of 
railroads. 

All expert accountants are unanimous that depreciation 
must be charged to output and there is little doubt that any 
owner who will give the subject serious consideration will 
reach the same conclusion. 

Perhaps one of the best examples of depreciation is that of 
a valuable patent, for which a large sum of money has been 
paid. It is known that this has but a certain number of years 
to run, and that each year its value becomes less. A certain 
proportion of the money paid for the patent must be written 
off each year and this must be charged to the product which 
is manufactured under the patent. 

This is elementary and is understood even by those who do 
not consider depreciation of buildings and plant equipment as 
a part of the cost. Oftentimes expensive plant equipment 
becomes, obsolete and must be discarded in much less time 
than the life of a patent, and still many owners do not con- 
sider that the cost of such equipment should be charged to 
the work produced during the life of the machine. 

There are two kinds of depreciation, one, the gradual wear- 
ing out due to age, which cannot be remedied by repair, and 
the other is due to machines or appliances becoming obsolete. 

In some classes of equipment the depreciation by wear is 
the more important, while in other classes used for work in 
which the process of manufacture is rapidly changing and in 
which an expensive machine may be out of date and discarded 
in a few years, the depreciation by obsolescence is the more 
important. 

Some expert accountants attempt to keep these two kinds 
of depreciation separated, but as both can only be approxi- 
mately estimated there does not appear to be any advantages 
gained by this separation and it adds to the complication of 
the accounts. 



32 COST KEEPING AND SCIENTIFIC MANAGEMENT 

HOW IS DEPRECIATION DETERMINED? 

Depreciation can only be determined by estimating the use- 
ful life of the building or machine and its scrap value at the 
end of the period, and spreading the difference between cost 
and scrap value over the period of life. 

The life of a building or equipment depends principally 
upon its character and use. Some buildings, for example a 
stone storehouse, depreciate very slowly — probably not 
more than 2 per cent, a year, while others depreciate very 
rapidly. A wooden blacksmith shop or foundry which is 
subject to smoke, heat, gases, etc., depreciates very rapidly. 
A building in which rapidly revolving shafting is employed, 
or machines operating with considerable shock, as a number 
of drop- forge hammers, also depreciates rapidly and for such 
a yearly depreciation of from 4 per cent, to 8 per cent, should 
be allowed. 

Machinery depreciates more rapidly than buildings and 
some classes much more than others. This is true of depre- 
ciation by use, but greater differences are found in different 
lines of manufacture due to advances in the methods of manu- 
facture. In some lines the changes in methods are not radical 
and are comparatively few and the life of a heavy machine 
tool can conservatively be considered as 15 to 20 years. In 
other lines there are radical changes due to new inventions, 
and these may be frequent and it is not safe to consider the 
life of the machine as greater than five years. 

Various estimates of experts are available regarding the 
rates of depreciation; perhaps those given by Dicksee and 
Tiffany serve as the best rough guide, but the average rates 
recommended by the commission of the National Machine 
Tool Builders' Association are, for the manufacturer, more 
conservative. These are as follows: 10 per cent, on ma- 
chinery, 5 per cent, on frame buildings, and 3 per cent, on 
brick buildings. These rates are for favorable conditions, 
and apply to the total original value and not to a decreasing 
value. 



THE VARIOUS ELEMENTS OF COST 33 

However, no rates should be accepted and used without 
full investigation of the conditions of the equipment under 
consideration. The Interstate Commerce Commission has re- 
fused to promulgate standard rates of depreciation, stating 
that " Conditions under which equipment is used vary so 
greatly that no uniform rate of depreciation for all roads 
could reasonably be determined. The proper rate will, of 
course, vary inversely with the life of the property to which 
it pertains, and its determination must take into consideration 
whatever affects the life of the property." 

Each case must be considered on its merits, and the esti- 
mates should be made by one of experience and judgment 
who knows all the conditions ; but it is wise to remember 
that it is far better to err by over-estimating than by under- 
estimating the depreciation. 

DETERMINATION OF THE DEPRECIATION TO BE CHARGED OFF 

EACH YEAR. 

There are numerous methods offered by accountants for 
charging off the depreciation yearly. It is considered that 
from the standpoint of the manager or engineer only two 
need be presented. 

The first and simplest, and the one most commonly used, 
is to divide the difference between the actual first cost and the 
scrap value by the number of years it is estimated the machine 
or building will be used, and the quotient gives the yearly 
amount which must be charged to the cost of the product. 

The second method is theoretically at least more attractive. 
The cost charged to the product on account of a machine or 
building is not only depreciation, but also repairs, and it is 
desirable that the sum of these two for each year should be 
fairly uniform. When . a building or machine is new the 
repair cost will be small, and it will increase with increasing 
age. Therefore to keep the sum of depreciation and repairs 
fairly constant for each year a high depreciation should be 
charged when the plant is new, and should be decreased each 
year. This method of charging depreciation is also in ac- 



34 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



cordance with the actual value of a machine or building at 
a forced sale, as there is no doubt that the reduction in selling 
price will be greater after the first year of use than the reduc- 
tion in value from the ninth to the tenth year. Moreover, a 
new machine is probably competing with old machines, and 
later, as it grows old, is in turn competing with new machines ; 
a machine is, therefore, better able to stand the higher charges 
for depreciation when new; and with the low rate when old 
is better able to compete with new machines. 

There are numerous ways of computing the decreasing 
rate. The method given by Cole is simple and satisfactory. 
He divides the difference between first cost and scrap value 
by the years of life, and depreciates each year a fraction 
comprising the number of years to run as a numerator and 
the sum of the year numbers as a denominator; for example, 
if the lifetime is five years, add 5, 4, 3, 2 and 1, getting 15, 
and in the first year write off five-fifteenths, in the second 
year four-fifteenths, and in the last year one-fifteenth. 

Applied to a machine costing $200 to last five years and 
with a scrap value of $20, this works out as follows: 

$200 — $20 = $180, shrinkage. 

Denominator, 5 + 4 + 3 + 2 + 1 = 15; $180 -f- 15 
= 12. 



Year. 


Depreciation 
Fraction. 


Depreciation. 


Value. 



I 
2 

3 

4 
5 




$60. 
48. 

3^ 

24. 
12. 


$200. 

140. 

92. 

56. 

32. 

20. 


% 5 Of $180 
%5 " 
%5 " 
%5 " 
Ylo " 



THE USUAL METHOD OF ESTIMATING AND APPORTIONING DE- 
PRECIATION IS UNSATISFACTORY. 

In many establishments where depreciation is considered 
the manner of estimating and apportioning the amounts is 



THE VARIOUS ELEMENTS OF COST 35 

almost entirely guesswork. Usually the estimated value of 
the buildings is taken as a whole and a total yearly deprecia- 
tion figure fixed. The machine tools and other plant equip- 
ment are similarly treated as a whole. The total depreciation 
is then treated as a general expense and is applied either as a 
percentage of direct labor or on the basis of hours of pro- 
ductive labor. There may be great variation in the deprecia- 
tion of the various buildings of the plant, and this is also true 
of the plant equipment. It is impossible to even approximate 
to an average rate of depreciation under these conditions. 

In every plant there should be a complete inventory of the 
plant equipment and buildings. This inventory can best be 
kept on cards and the condensed history of every building 
and every machine should be given on these cards. For each 
building and each class of tools or equipment the life should 
be estimated and the yearly depreciation determined and this 
should be recorded on the inventory cards ; from these total 
depreciation can then be obtained. 

The usual method of apportioning depreciation is also un- 
satisfactory. In a large plant the depreciation amounts to a 
considerable sum, and by charging this into general expense 
it is distributed as an average and some shops or departments 
pay a much higher rate than should be charged, while others 
pay lower. For example, there is comparatively little equip- 
ment in a sail loft, a rigging loft, a paint shop, a shipwright's 
shop, or for a laborers' force, while a large number of men 
are employed. By charging depreciation to general expense 
the work in the shops mentioned pays for a large proportion 
of the depreciation of expensive equipment in the machine 
shop, electrical shop, sheet-metal shop, joiner shop, etc. 

It requires no additional work to determine the depreciation 
for each shop or department and but little additional clerical 
work to apportion this each month to the department or shop 
to which it belongs. The shop depreciation then becomes an 
element of the shop expense and only such depreciation as 
cannot be charged to the shop goes to the general expense. 
With the improvements in methods of shop management, de 



36 COST KEEPING AXD SCIENTIFIC MANAGEMENT 

preciation, together with other fixed charges, will be further 
divided and apportioned to both machine-tool times and labor, 
but such methods are to-day not practicable. 

The disposition of depreciation after it has been charged 
to product comes within the province of the accountant and 
not the cost keeper, but briefly it may be stated that the 
amount charged to product should be credited to the real es- 
tate and plant equipment accounts and debited to the deprecia- 
tion account, and should each month be closed into profit and 
loss. If the establishment is operating at a profit there is 
available from depreciation a fund, the amount of which just 
equals the shrinkage in the value of the physical assets of the 
company due to depreciation. This can be employed to pur- 
chase new plant equipment or as a sinking fund, but must not 
be considered as an additional asset. 

TAXES AND INSURANCE. 

These expenses require little explanation. The general 
method of distributing these by charging them to general ex- 
pense is open to the same objection, stated above, regarding 
depreciation. They should be apportioned to the shops or 
departments in accordance with the value and the risks and 
should be charged to the shop expense, except that portion 
which cannot be charged to shops and is for the benefit of 
the whole plant, which should be charged to general expense. 
Special insurance should be charged direct to the work it 
covers. An example of this kind is the insurance of a ship 
building at a shipyard, or if a special product, on account of 
its nature, temporarily increases the insurance rates on the 
whole plant or a portion of it. In these cases the additional 
insurance paid should not be charged to the expense accounts, 
but should be charged direct to the product which causes the 
increase in the regular rates. 

UPKEEP OF PLANT. 

Xo question arises regarding ordinary repairs, but there is 
sometimes a tendency to charge minor additions and changes 



THE VARIOUS ELEMENTS OF COST 37 

and also repairs which are in the nature of renewals to the 
capital account, and great care should be exercised in making 
charges of this nature to this account. No minor changes or 
additions should be so charged, and no repairs' in the nature of 
renewals should be charged unless it be clear that they actu- 
ally add to the market value of the plant. In no case should 
additions or part renewals be taken up direct in the capital 
account, but should be carried in separate accounts and so 
shown on the balance sheet, so that the merit of these trans- 
actions may be judged. In all ordinary cases the cost of up- 
keep should be charged to the proper expense account. 

INTEREST AND RENT. 

There is much discussion as to whether or not interest 
should be charged to the product. If the entire plant is 
rented no one questions that the rent paid should be charged 
to the cost of production, but when the plant is owned by 
the company operating it, many consider that interest and 
rent should not be charged. If it is correct to charge rent in 
the first case, there should be no question that it is a proper 
charge in the second. The interest on the investment must 
be met and this is chargeable whether the concern owns the 
property or not, for whether return is made to landlords, 
lenders of capital or to stockholders, the output must produce 
some means of meeting it. Professor Cole in his treatise on 
accounting puts this very clearly as follows : 

" Rent in the ordinary use of the word is composed of two 
elements : First, payment for exceptional advantages accru- 
ing to the owner of land or buildings because of location or 
other natural qualities — as exceptional shipping facilities or 
low power-cost; second, interest on the improvements made 
on the land, such as buildings. In the true economic sense, 
rent is only that part of the payment which is due. to the ex- 
ceptional facilities, as low power-cost. Obviously rent arising 
from such advantages is in one sense not cost at all, but a 
measure of gain — it measures the saving by having the use 



38 COST KEEPING AND SCIENTIFIC MANAGEMENT 

of this special facility. Even though such economic rent is 
paid to another, it comes back in the saving. It is an out-go, 
but it is offset by a special income — or, what is the same 
thing, a reduced expense elsewhere. This has led to the 
theory that, at least for the manufacturing concern owning 
the land and buildings which it uses, rent need not be included 
in the schedules of cost. 

" The reply to this lies in the answer to the question, What 
is the purpose of keeping manufacturing accounts? Unless 
the accounting shows not only a basis of charges for manu- 
factured goods, but also what are the gains from the conduct 
of business, it is not worthy of its name. If the concern 
pays rent, clearly the rent is a cost — ■ as much as the payment 
for wages ; in both cases an outgo is suffered in order that a 
return may be secured. If the concern is the owner of the 
property that it uses, two facts require that rent be charged 
as a cost. First, if the property is valuable enough to yield 
economic rent (i. e., more than interest on the improvements 
on the land), it is so because it confers some advantage in 
leaver costs — as cheap power or low freights. If, then, rent 
is excluded from costs and the cost book shows only actual 
cost paid to outsiders by the business, prices based on the 
cost book give to the customer all the advantages of the cheap 
power or the low freight. Such prices are not normal and 
can never long continue. The only way to show the facts is 
to show that the cheapness of power or of freight is abnormal, 
and this can be done by entering rent as one of the costs. 
Second, the concern is in this case not merely engaged in 
manufacturing; it is a landholder, and as such it receives a 
landholder's revenue as distinguished from a manufacturer's 
revenue. An important purpose of accounting is to show 
different kinds of sources of revenue." 

In practice it is not necessary to separate rent proper from 
interest, and the two should be carried together as a percentage 
of the total investment. 

Interest should be distributed to the product in the same 



THE VARIOUS ELEMENTS OE COST 39 

manner as has been described for taxes, insurance, and de- 
preciation. The amount charged to the product should be 
carried to the reserve interest account, and each month should 
be closed into profit and loss. 



CHAPTER IV 

Distribution of Indirect Costs 

The distribution of indirect costs should depend to a certain 
extent on whether payment for the work is made on the basis 
of cost plus a percentage for profit, or by the jobs. 

In some establishments there is much work for which pay- 
ment is made by taking the book costs and adding a percentage 
of profit previously agreed upon. This is frequently the case 
in large ship-repair jobs, where it is difficult to determine ex- 
actly the work necessary until everything is uncovered. It is 
often the case in repair jobs in a machine shop. Frequently 
large buildings or other large undertakings are paid for in 
the same manner. Under these conditions the purchaser has 
the right to check, day by day, the men employed on the work, 
and also to investigate the book charges. In such cases the 
indirect charges, if high, may be the cause of much contention, 
and this may result in the firm not getting future contracts. 
Very few understand indirect costs, and not a few, who have 
work done at cost plus a percentage, feel that in the in- 
direct charges they are paying for something which they do 
not receive. They realize, of course, that the general ex- 
penses must be paid, but they consider that 15 to 20 per cent. 
of the direct-labor charge is ample to cover all legitimate ex- 
penses, and that anything in excess of this is simply additional 
profit. An establishment which charges 60 or 70 per cent, 
for indirect costs will be looked upon as guilty of extortion 
and not only will never get additional work from the cus- 
tomer so charged, but its reputation will suffer and it will lose 
other customers. 

Scientific ideals are excellent, but, after all, a shop or fac- 
tory exists to make money. This is essentially a commercial 
age, and the successful engineer must recognize this fact and 

40 



DISTRIBUTION OF INDIRECT COSTS 4 1 

put aside some of his scientific ideals if, by so doing, he can 
place the concern for which he is working in a better position 
to make a commercial success. 

In an establishment which does much work on the cost 
plus a profit basis, the cost system must be arranged so that 
the indirect costs will not appear large. This can readily 
be done by charging everything possible direct to the work. 
In this case sub-foremen, leading men, etc., should be charged 
direct ; all miscellaneous material, as oil, waste, emery cloth, 
etc., and also small tools should be charged direct instead of 
to the expense number. Machine rates should be used and 
to these should be attached interest, depreciation, taxes and 
insurance, not only of the tool, but also of the building. By 
following these methods the remaining indirect charges will 
be small, and the percentage added for indirect costs will ap- 
pear to the buyer reasonable. This also gives the buyer an 
opportunity each day to check that which has been charged to 
his account against what has actually been used. 

In a strictly manufacturing establishment, or in shops where 
the repair work is taken at a contract price, no such conditions 
exist, and it is more accurate and more satisfactory to make 
the charges to product differently. 

DISTRIBUTE INDIRECT COSTS IN ACCORDANCE WITH BENEFITS 

RECEIVED. 

The distribution of the indirect costs should be made in 
such a way that each production order will receive charges 
which closely approximate to the proportional benefits it re- 
ceives from the various elements of indirect costs. 

It is well to recognize that any practicable scheme which 
has been devised or which has been proposed for distributing 
these costs can be adversely criticized. Any manager or en- 
gineer can take any proposed system which can be put in op- 
eration without great cost, and advance many good reasons 
to show that it is inaccurate. But it should be remembered 
that a system proposed by these same critics will be subject 
to the same fate at the hands of others. 



4^ COST KEEPING AND SCIENTIFIC MANAGEMENT 

As stated before, scientific accuracy cannot be obtained. 
Moreover, a system well suited to one establishment is not 
suited to another. The only wise course is for a manager 
himself to thoroughly study cost accounting, and then secure 
an expert to work out, under the general instructions of the 
manager, the details of the system. 

Few managers have the time to devise and install a system, 
and at the same time attend to their other duties, but they 
should thoroughly understand the principles, for unless they 
do, they will be unable to give the expert the assistance and 
support needed to enable him to work to the best advantage. 

DISTRIBUTION BY MACHINE RATES THE MOST SCIENTIFIC 

METHOD. 

In the present day, machinery performs a very important 
part in the production of work. Very expensive machines 
are designed and built to reduce labor charges, and thousands 
of automatic and semi-automatic machines are to-day doing 
the work that was formerly done by many thousands of highly- 
paid mechanics. It would seem that the machine-tool time is 
the most accurate and most satisfactory method of distrib- 
uting the indirect costs, and nearly all engineers consider this 
the most accurate, but some do not consider it the most satis- 
factory method. 

A great many of the indirect expenses of a factory attach 
themselves naturally to the machine tools, as will be seen 
from the analysis of this method. We have seen in previous 
chapters the disadvantages of charging interest, depreciation, 
taxes and insurance to general expense and distributing this 
on the basis of direct labor. These troublesome items of ex- 
pense naturally attach themselves to the machines. As a 
large part of the cost of the plant is machinery, and as a 
large part of the cost of real estate, buildings, etc., is for the 
benefit of machinery, it is natural that the expenses men- 
tioned should be distributed on the basis of machine-tool time 
instead of labor time. 

Take first the machine itself: the interest on the monev in- 



DISTRIBUTION OF INDIRECT COSTS 43 

vested in the tool itself and its foundations, the depreciation, 
taxes and insurance due to the tool can be paid for by the 
work produced by the tool. The power consumed in running 
the tool and repairs to it should be charged to the product of 
the machine. It would, therefore, seem that there can be no 
question that at least these expenses should be based on the 
machine time. The land occupied by the shop, and the build- 
ing itself, are as much for the benefit of the machines as for 
the labor employed. The expenses due to interest, deprecia- 
tion, taxes, insurance and repairs of buildings and land can 
be apportioned to the machine time by making the distribution 
on the basis of floor space occupied by the machines. A num- 
ber of other expenses attach themselves readily to the ma- 
chines, and by going through these carefully itseems as if it 
might be possible to establish an accurate rate for each ma- 
chine and appliance, which will leave but few expenses to be 
apportioned on the basis of labor. 

There is no doubt that this method, if it can be followed, 
is more accurate than distribution on the basis of labor alone. 
I believe that in years to come the indirect expenses will be 
distributed in this manner, that is, partly by machine times 
and partly by labor. At the present time, however, it is im- 
practicable in many shops, and there are very few where 
it can be used with any degree of accuracy. 

In carrying out such a system it is necessary to make many 
assumptions, which may be correct, but which are more likely 
to be very much in error, and the results are likely to be fully 
as inaccurate as if direct labor had been used as the basis 
for distribution, and the machine rate involves much more 
clerical work. 

DIFFICULTIES IN FOLLOWING MACHINE-RATE SYSTEM. 

A few of the difficulties which will be encountered in at- 
tempting to follow this system will be given : From the sci- 
entific point of view the cost of power should be distributed to 
the machines that use the power. In some of the best treatises 
on accounting we are told that the power expense should be 



44 COST KEEPING AND SCIENTIFIC MANAGEMENT 

so distributed and the subject is then usually dismissed with 
a general statement to the effect that the proportion of the 
total power used by each machine should be measured or es- 
timated and the power expense distributed on this basis. 

This is well enough for the expert accountant, but the man- 
agers and engineers well know that it is not practicable to 
determine the power used by the various machines under 
varying conditions, and that so-called estimates of power used 
by each machine are nothing more than guesses. 

If the power were entirely electric, and the machines were 
motor driven, after extended observations fairly accurate es- 
timates might be made, but even under these conditions the 
rate for each machine will vary in accordance with the work 
clone. In many shops there is electric, steam, compressed air 
and hydraulic power, and it is impossible to even approxi- 
mately distribute the power expense to the machines in ac- 
cordance with the actual power used. Under present condi- 
tions a manager can feel well satisfied if he can approximately 
determine the proportion of the total power cost that should 
be borne by each shop. 

We are also told that the cost of heat should be kept sep- 
arately and apportioned according to cubical contents, and 
that the cost of light should be apportioned in accordance 
with floor area. The manager well knows that this is impos- 
sible ; the lightning circuits are, in nearly all cases, taken from 
the power mains, and the same boilers that supply steam for 
the steam hammers supply steam for the testing slab, for 
heating, for driving tools, and a number of other purposes. 

Any attempt at scientific accuracy in the distribution of the 
power expense must necessarily be a failure. 

If, however, assumptions are made and a machine rate car- 
rying the greater part of the expense burden is established, 
other serious difficulties are experienced in applying these 
rates. It is seldom that any machine tool is continuously em- 
ployed, and some disposition must be made of the idle time. 
This can be done by estimating the number of days in the year 
that the machine will be used and basing the rate on the 



DISTRIBUTION OF INDIRECT COSTS 45 

probable use of the machine, or by charging the idle time of 
each machine to an expense number and pro-rating this by 
direct labor, or by the use of an auxiliary rate for idle time. 
The use of any of these methods immediately destroys any 
claims that may have been made for scientific accuracy. 

There is still another important objection. There are very 
few shops in which work is carefully routed to the machine 
best suited for the work, and oftentimes work will go to a 
large machine with a high rate when it could have been done 
equally as well in a smaller machine with a lower rate. Or 
even if the work is carefully routed it will often be found that 
the smaller machines are crowded with work and to avoid 
delay the work which should go to the small machine is put in 
an idle large machine at a much higher rate. These condi- 
tions completely upset accurate cost keeping and give costs 
which are very misleading. Whenever machine rates are used 
in a jobbing shop these difficulties are encountered, and I 
know of cases where considerable delays have been experi- 
enced because a foreman who wished to keep down his costs 
would not put work in an idle machine of a higher rate, but 
would wait for days to get the work in a lower-rated machine. 

The machine-rate method is, no doubt, theoretically very 
attractive, and it is advocated not only by accountants, but 
also by many engineers, but in practice this system has made 
no great headway, on account of the difficulty of its applica- 
tion to the average shop. 

INACCURACIES OF DISTRIBUTION BY DIRECT-LABOR METHOD. 

Distribution of the burden by the direct-labor method is ad- 
mittedly not scientifically accurate, but is by far the most 
simple and is most generally used. It is, therefore, desirable 
to examine the inaccuracies of this method. 

Many of the expenses attached to a manufacturing plant 
bear no relation to the direct-labor expenditures. This is 
particularly true of the fixed charges, such as interest, de- 
preciation, insurance and taxes; these charges go on whether 
labor is employed or not, and their distribution by direct- 



46 COST KEEPING AND SCIENTIFIC MANAGEMENT 

labor expenditures cannot be defended except on account of 
the simplicity of the method and the knowledge that under 
the shop conditions usually found, any other method is equally 
inaccurate. 

Under the direct-labor method, work done in costly auto- 
matic machines, or in semi-automatic machines with cheap 
attendants, receives but a small part of the indirect charges, 
while it should receive a large part. The work at the bench, 
which requires practically no equipment but does require a 
skilled machinist at perhaps $4 per day, is charged with twice 
as much burden as the work in a ten-thousand-dollar machine 
run by a two-dollar-a-day operator. To carry this still fur- 
ther, the work in the ten-thousand-dollar strictly automatic 
machine carries none of the burden, not even power, while 
rightfully it should carry a large proportion of the burden. 

On the other hand, it must be admitted that in the average 
shop these conditions are exceptions, and these can be met 
by making charges for the use of special machines and de- 
ducting the amount so charged from the shop-expense burden, 
distributing the remainder in accordance with the direct-labor 
expenditures. 

Any system of cost keeping must be applied intelligently to 
meet special conditions. This is one of the reasons why only 
managers and engineers are able to plan a satisfactory system. 
The expert accountant knows nothing of these conditions, and 
it is not possible for him to meet them. 

DISTRIBUTION OF INDIRECT CHARGES BY DIRECT LABOR. 

There are several ways of distributing the burden in ac- 
cordance with the direct-labor expenditures. The one most 
generally used is to determine the proportion of the indirect 
shop charges to the direct labor expended in that shop, which 
gives the rate in cents for each dollar expended on direct 
labor. The general expense rate is determined by dividing 
the total of the general expenses by the total direct labor of 
the establishment. These two rates are added and multiplied 
by the direct labor expended in the shop on each production 



DISTRIBUTION OF INDIRECT COSTS 47 

order, which gives the indirect charges for each order for 
that shop. For example, in an establishment with a machine 
shop, a blacksmith shop and an electrical shop, the expendi- 
tures are as follows : 

Machine Shop: 

Direct labor charged to production orders $5> 000 

Indirect shop charges, labor, material and expenses.. 2,500 

Blacksmith Shop: 

Direct labor charged to production orders 1,000 

Indirect shop charges, labor, material and expenses. . 700 

Electrical Shop: 

Direct labor charged to production orders 1,000 

Indirect shop charges, labor, material and expenses. . 400 

General Expense : 

The general expenses, not chargeable to a shop, 

amount to 1 ,4°° 

The expense rates are then as follows : 

Machine shop : ^ = 50 cents for each dollar of direct labor 
expended ; 

Blacksmith shop: ~ =70 cents; 

Electrical shop : -—^ = 40 cents ; 

General Expense: ^^+1000 =20 cents. 

The direct labor charged on each production order in the 
machine shop is increased by 0.7; in the blacksmith shop by 
0.9; in the electric shop by 0.6. The total sum of indirect 
charges thus obtained is the total indirect cost for the order. 

A production order on which the direct-labor expenditures 
are: Machine shop, $200; blacksmith shop, $100; and elec- 
trical shop, $50 ; will carry the following indirect costs : 

Machine shop • $200 X 0.7 = $140 

Blacksmith shop 100 X 0.9 === 90 

Electrical shop 50 X 0.6 = 30 

Total indirect costs $260 

This can be carried in the total cost as a separate item, the 
elements being direct labor, direct material and indirect costs; 
or, if desired, the indirect charges may be merged into the 
labor and material by adding the labor portion of the indirect 



48 COST KEEPING AND SCIENTIFIC MANAGEMENT 

charges to direct labor and adding the portion due to material 
and expenses to the direct material, the total cost showing- 
only as labor and material. 

The latter method is strongly advocated by some of the 
best English authorities — particularly for shipyard accounts. 
This method has an important advantage, in that it enables 
the engineer to establish unit prices — per pound, per foot, 
per piece, etc. — separately for labor and for material. Costs 
divided in this manner are of assistance in the preparation of 
estimates for new work, particularly if the work is a large un- 
dertaking such as the construction of a large ship. 

Another method for the distribution of the indirect charges 
is by means of the direct-labor hours. In accordance with 
this method the shop-expense rate is determined by dividing 
the total shop expense by the number of hours of direct labor 
expended in the shop. The general expense rate is found by 
dividing the total general expense charges by the total num- 
ber of hours of direct labor expended in the establishment. 
These rates are applied as described and illustrated above, 
except that the hour of direct labor is the unit of distribution 
instead of the dollar of direct-labor expenditure. 

There are arguments both for and against each of these 
two methods. The distribution by expenditures for direct 
labor is more simple and does not require as much clerical 
work as the hours of labor method, and it is probably for this 
reason that it is more generally used. The hours of direct- 
labor method is a little nearer to the machine-rate method, 
which will no doubt eventually be used when scientific shop 
methods become more general. 

SHALL THE ACTUAL MONTHLY RATES, OR THE AVERAGE RATES, 

BE USED? 

In the distribution of the indirect charges, rates determined 
by previous experience, as the last year's rates, are some- 
times used instead of the actual rates determined each month. 
For the purpose of cost keeping there can be no objection to 
using the actual rates determined each month, and this method 



DISTRIBUTION OF INDIRECT COSTS 49 

has many advantages. In the preparation of estimates for 
new work, however, the average rates should be used or, bet- 
ter still, the average rates corrected for conditions that are 
expected when the work will be undertaken. In this way 
any abnormal conditions affecting the monthly rates will not 
show in the estimates. By using the actual monthly rates for 
cost keeping the entire expense is distributed and there is no 
necessity for a loss and gain expense account. 

SIMPLEST METHOD BEST FOR THE GREAT MAJORITY OF 

SHOPS. 

The importance of better cost-keeping methods in removing 
demoralizing competition and establishing stable conditions in 
much of the repair and manufacture work, has been previ- 
ously pointed out. The establishments that it is desired to 
reach are not the ones where the manager is debating whether 
he shall distribute the charges for heat in accordance with 
floor area occupied by a machine or the cubical contents taken 
up by the machine. The establishments that I desire to reach 
are the thousands where the manager does not include in the 
costs charges for depreciation or interest, and if these are 
considered at all it is only to take out of the profits at the 
end of the year a lump sum for these and other fixed charges, 
and the amount depends on the amount of the profits. If 
these thousands of establishments can be reached and mana- 
gers and owners can be interested in better cost methods, a 
great deal of good will be accomplished. 

It is, therefore, desirable to present a skeleton cost system 
in the simplest form. The most simple methods which re- 
quire the least amount of clerical labor are, therefore, chosen 
and the distribution of the indirect costs is made by means of 
the direct-labor expenditures. 

With interest awakened in the subject of cost accounting 
many managers will study the question as applied to their own 
conditions, and each can go as far as he likes or as far as his 
conditions will warrant in his effort to secure greater ac- 
curacy. If a manager prefers he can use the productive- 



50 COST KEEPING AND SCIENTIFIC MANAGEMENT 

hour rates to distribute the indirect charges with practically 
no changes in the methods outlined. Or, if he has some ex- 
pensive automatic or semi-automatic machine tools, for which 
he wishes to charge rates, he can establish the rates and charge 
these to the production orders and subtract the amounts thus 
charged from the shop expense. 

Perhaps in some shops where cost methods have received 
but little attention in the past, machine rates can be success- 
fully established, but it is recommended that before the ma- 
chine-rate system is started a good shop organizer be secured 
to work out all details. 

THE WORK IN EACH SHOP OR DEPARTMENT SHOULD CARRY 
ITS OWN EXPENSE. 

The expenditures made for the benefit of the work in a 
shop or department should be distributed to the work ac- 
complished in that department. 

Each shop or department should, therefore, have a separate 
expense account, which is subdivided into a sufficient number 
of sub-accounts to enable a manager to know exactly for what 
each expenditure is made. It is only in this way that ex- 
travagance can be checked, and the benefits derived from each 
expenditure determined. 

A common method of but one expense account for each 
shop against which all expense for the shop is charged is very 
unsatisfactory and leads to extravagance, and it is impossible 
to analyze the expenditures. 

Not only should the shop expense carry the usual expendi- 
tures made to this account, but it should carry its proper 
share of the fixed charges. Interest and rent based on the 
investment in land, buildings and equipment should be in- 
cluded; depreciation of buildings and equipment should be 
included; taxes to shop land, buildings and equipment should 
be included; insurance of shop buildings and equipment should 
also be included. 

The amount of these fixed charges that should be carried 
by the shop expense is easily determined ; for interest, taxes 



DISTRIBUTION OF INDIRECT COSTS 5 I 

and insurance it is only necessary to determine the amount of 
the shop investment or value as a proportion of the total in- 
vestment or value, and use this proportion applied to the total 
charges under each head for the entire plant ; for depreciation 
the actual amounts to be written off due to the shop buildings 
and equipment should be used. The proper proportion of the 
total power-house expense should be included in the shop- 
expense account, but this is not so easily determined. 

When so many are advocating the distribution of this ex- 
pense to each machine we can at least claim that a fair ap- 
proximation can be obtained for each shop. If electric power 
only is used the power consumed by each shop can be obtained 
exactly from meter readings. This, however, is seldom the 
case, as ordinarily steam, compressed air, hydraulic and elec- 
tric power are used, and the situation is further complicated 
by the fact that in many establishments power is used outside 
of the shop by men from the shop ; for example, compressed 
air by the machinists for running air tools, or electric 
power for the same purpose or for electric lights, or both 
forms of power for hoists for handling material in erection 
work. 

These same conditions exist for nearly every shop in the 
establishment. Under these conditions it is impossible to 
measure the amount of power used by each shop and the men 
from the shop. The proportion of the power-house expense 
to be borne by each shop or department must, therefore, be 
estimated. 

In making this estimate consideration should be given to 
the following conditions in each shop: Number of machines 
requiring power and total horsepower required; proportion of 
time machines are in operation; the amount of power required 
by men working outside of the shop; the quantity of work 
in each shop. 

From consideration of these conditions the manager de- 
termines the proportion of the total power expense that should 
be borne by each shop. This proportion may vary from 
month to month owing to change in conditions, and the per- 



52 COST KEEPING AND SCIENTIFIC MANAGEMENT 

centage to be charged to each shop should be determined each 
month. 

No doubt some will consider that due to the inaccuracy 
of estimates obtained in this manner the power expense 
might as well be charged to the general expense account and 
pro-rated direct with that account and thus reduce the clerical 
work. This view is not well taken, for we know that some 
shops, for example, the paint shop, employ a comparatively 
large number of men and use but little power, while the 
forging shop, employing a less number of men, uses a very 
large amount of power. By charging power to the general 
expense each dollar expended in the paint shop for direct 
labor carries as much burden for power as each dollar in the 
forging shop. By distribution to shops, even though based on 
estimates, these glaring inequalities can be avoided. 

POWER-PLANT expense. 

The power-plant expense should be recorded under appro- 
priate subheads as described for the shop expense. There 
should be included in this not only the expenditures for re- 
pairs and maintenance of buildings and equipment, and labor 
and material employed in the production and transmission of 
power, but there should also be included charges for deprecia- 
tion, interest, taxes and insurance due to power-house build- 
ings, land, machinery and transmission lines. The up-keep 
of transmission lines from the power house to the shops 
should be charged to the power-plant expense. Transmission 
lines and power machinery inside of the shops should be 
charged to the shop expense. This is a more or less arbi- 
trary division, but it is reasonable and works well in practice. 
The power expense for each month is apportioned to the 
various shops or departments in the manner previously de- 
scribed. 

STOREHOUSE EXPENSE. 

The storehouse should be conducted as a separate depart- 
ment and should have an expense account properly subdivided. 



DISTRIBUTION OF INDIRECT COSTS 53 

The total expense of the storehouse and purchasing depart- 
ment should be distributed to material issued for production 
orders and this expense disappears, becoming an element of 
the cost of the material. 

The storehouse expense must include interest, taxes and 
insurance on storehouse land, buildings, equipment and stock. 
Depreciation of buildings and equipment must be charged, 
and in a separate account depreciation of stock, and losses 
due to breakage and waste must be charged. 

The storehouse expense should be distributed each month 
to the issues for that month. Generally this should be ap- 
plied as a percentage of value, but in the case of articles like 
lumber, structural steel, etc., received in large quantities, and 
where the expenditures for receiving, transporting and piling 
are large, separate orders should be issued for this work, and 
the cost should be charged direct to the cost of the material. 

GENERAL EXPENSE. 

The general expense includes the cost of administration, 
office expenses, fixed charges, etc., that cannot be located to 
shops and departments, and the expense of operating and 
maintaining general facilities or equipment for the use of all 
shops and departments, such as railway tracks, roads, yard 
cranes, general yard labor, floating property, railway freight 
service, etc. 

GENERAL EXPENSE AND SHOP EXPENSE TO BE DISTRIBUTED TO 
PRODUCTION ORDERS. 

By the methods outlined only general expense and shop 
expense are distributed to production orders. These are dis- 
tributed at the end of each month as previously described. 
While the storehouse expense is distributed to material issued 
for production orders, for convenience it is found best in 
practice to distribute this at the end of each month as a per- 
centage on the total value of the material charged to each pro- 
duction order. It will, therefore, appear on the cost of work 
card as an indirect expense. With the distribution of these 



54 COST KEEPING AND SCIENTIFIC MANAGEMENT 

indirect charges to production orders the total factory cost is 
shown ; but to obtain total cost the selling expense must be 
included. 

SELLING EXPENSE. 

As a monthly balance sheet is desired, the selling expense 
should be distributed each month. This can be applied to 
the product actually sold, which is the proper way for a man- 
ufacturing concern like a machine-tool builder. In a jobbing 
repair shop, or in an establishment like a shipyard, where 
there is both repair and construction work and where con- 
tracts require several years to complete, it is impracticable to 
distribute the selling expense to the product sold. In these 
cases the selling expenses should be kept separately, but should 
be merged with the general expense and distributed with it. 
The factory cost will in these cases then include the selling 
cost. 



CHAPTER V 

The Production Order, Shop Order and Cost Section 

Records 

In outlining the cost system no attempt will be made to de- 
scribe an organization, and but few forms will be given. In 
the first place, to describe an organization giving all forms 
will require more space than is available, and in the second 
place there is but little advantage gained in doing this. Con- 
ditions vary so greatly that an organization and forms which 
are ideal for one establishment will be entirely unsuited to 
another. The general principles are, however, the same, and 
when these are understood it is not difficult, in devising the 
details, to apply these principles to the conditions existing 
in each shop. 

In any but the smallest establishments there are usually 
several shops or departments, and in the system outlined pro- 
vision will be made for several shops. If it is desired to 
apply the methods described to an establishment with but one 
shop, this can readily be done. I have selected a shipyard 
as an example, because it contains many dissimilar shops, and 
further because I have been intimately associated with ship- 
yard accounts and management for many years. 

UNIFORM SIZE BLANK FORMS. 

Too often little attention is given to uniform sizes for 
blank forms. In many establishments practically every blank 
is of a different size. This makes filing more difficult and 
there are no advantages. 

The forms can and should be reduced to a few standard 
sizes and every new blank should be made to conform to a 
standard size. Vertical filing is generally used and has many 

55 



56 COST KEEPING AND SCIENTIFIC MANAGEMENT 

advantages. The standard sizes selected for forms should 
lit standard vertical filing cases. 

All cost records should be kept on cards and not in books. 
The advantages of card records are well known and no com- 
ment is required. 

THE PRODUCTION ORDER. 

The production order, which will be called the " Job order," 
is the authority for the factory to undertake work. It should 
be signed by the manager or his representative, who is author- 
ized to order work. No work should be undertaken except on 
written job orders or on standing indirect cost orders. 

The job order should indicate either on its face, or by ac- 
companying plans and specifications, exactly the work that is 
to be accomplished. In many repair jobs it is not possible at 
first to give in detail the work to be accomplished. In such 
cases a preliminary order should be issued to make a com- 
plete survey of the job to determine exactly the work neces- 
sary, and when this is accomplished to issue job orders for the 
work itself. It is very bad practice to issue job orders in 
general terms and follow the job order with oral instructions 
for the work actually required. 

The order must at least be in duplicate, one copy to the 
cost file and one copy to the shop or department that is to do 
the work. Ordinarily from four to eight copies will be re- 
quired in order that information can be given to all who are 
interested or responsible for any part of the work. 

The order should be typewritten and the paper used should 
be of a size for the typewriter and permit of manifolding; it 
should be a standard size, and when a number of copies are 
regularly required, it is desirable to use different colors, for 
example, white for cost file, blue to the foreman responsible 
for the job, pink to other foremen who have some work on 
the job, salmon to the superintendent, etc. A convenient size 
and type of job order is shown in Fig. I. 



PRODUCTION ORDER AND COST SECTION RECORDS 



57 



Job Order No Title Sub-Title.. 

Appropriation Gen'l Head 

NAVY YARD, MARE ISLAND, CAL. 



Sir :- You will please 



19 




ESTIMATED COST ACTUAL COST 

Labor 

Material 

Indirect 

Total _ ^_^_ 

Authority 

Date of Completion 

To 

Respectfully, 

To be returned to office upon completion of work 
Fig. 1. Job Order issued by The Main Office. Size 6" by 8V2". 

A regular system for numbering orders should be followed. 
Job orders for output will be designated by numerals; stand- 
ing expense orders will be designated by letters; special ex- 
pense orders will be numerals followed by the classification 
letters showing the expense account to which the order be- 
longs and into which the cost will be carried for record and 
for distribution. All service cards for labor performed and 
requisitions for material obtained will bear the symbol or 
charge number of the job order for the work which obtains 
the benefit of the labor and material. 



SHOP ORDERS ISSUED BY AUTHORITY OF THE PRODUCTION 

ORDER. 

It is seldom that all the work required by a production 
order can be accomplished in one department or one shop. 



58 COST KEEPING AND SCIENTIFIC MANAGEMENT 

MFG, DEPT. HOI. NAVY YARD, MARE ISLAND, CAL. 

SHOP ORDER. 
OUTPUT ACCOUNT. 



JOB ORDER NO 

TITLE SUBTITLE 



APPROPRIATION 

GENERAL HEAD 



TO SHOP. 

You will do the following work charging labor and material, 
as above: 




FOREMAN .„ S HOP 



ORIGINAL AND DUPLICATE TO BE FORWARDED TO SHOP IN WHICH WORK IS DONE. 
FOREMAN RECEIVING ORDER WILL PUT IN DATE OF RECEIPT AND DATE ON WHICH WORK 
WILL BE COMPLETED, RETAIN ORIGINAL AND IMMEDIATELY RETURN DUPLICATE. WHEN 
JOB IS COMPLETED FOREMAN DOING WORK WILL FILL IN ACTUAL DATE OF COMPLETION 
AND FORWARD TO SHOP THAT ISSUED THE ORDER AND IF WORK IS SATISFACTORY 
ORDER WILL BE INITIALED AND RETURNED TO THE FOREMAN WHO DID THE WORK. 



ORDER WAS RECEIVED. 
WILL BE COMPLETED ... 



, AND THE WORK 
FOREMAN 



WORK ACTUALLY COMPLETED 



FOREMAN 



IS WORK SATISFACTORY? 



Fig. 2. 



FOREMAN 

Shop Order for Output issued by one foreman on another by 
authority of a job order. slze 6" by 8y 2 ". 



PRODUCTION ORDER AND COST SECTION RECORDS 59 

MFG. DEPT. 1102 NAVY YARD, MARE ISLAND, CAL. 



SHOP ORDER. 

EXPENSE ACCOUNT 

JOB ORDER NO 

TO SHOP . 

ESTIMATED COST LABOR _ _ 

ESTIMATED COST MATERIAL 

TOT A L 

APPROVED BY 

I NSTRUCTIONS. 

1, ORIGINAL AND DUPLICATE TO BE FORWARDED TO THE FOREMAN WHO IS TO DO 
THE WORK. WHO WILL FILL IN THE ESTIMATE AND FORWARD BOTH COPIES TO THE 
OFFICER AUTHORIZED TO APPROVE THE WORK. WHO WILL FILL IN THE DATE OF RE- 
CEIPT AND DATE OF PROMISED COMPLETION. INITIAL. RETAIN ORIGINAL. FORWARD 
DUPLICATE TO SHOP REQUESTING WORK AND PROCEED WITH THE WORK. 

2. WHEN COMPLETED. DATE OF COMPLETION WILL BE FILLED IN AND ORIGINAL 
FORWARDED TO FOREMAN REQUIRING WORK. WHO WILL EXAMINE WORK, STATE IF SAT' 
ISFACTORY, INITIAL AND RETURN TO FOREMAN WHO DID THE WORK. 



WORK REQUIRED 




FOREMAN .._ S HOP 



ORDER WAS RECEIVED. 
WILL BE COMPLETED 



WORK ACTUALLY COMPLETED... 
IS WORK SATISFACTORY? 



, AND THE WORK 

FOREMAN 

FOREMAN 



FOREMAN 

Fig. 3. Shop Order for Expense Account Work. This must be ap- 
proved by the Shop Superintendent. Size 6" by 8%". 



6o COST KEEPING AND SCIENTIFIC MANAGEMENT 

When the work required in several shops is well defined, the 
foreman having primary cognizance of the whole job is des- 
ignated on the order and the foremen of other shops having 
some part of the work are given copies, which is their au- 
thority to proceed with this work. 

In many cases, however, miscellaneous incidental work will 
be required of shops other than those holding job orders. 
When work of this kind is required it is obtained by the fore- 
man holding the order issuing a secondary order called a 
" shop order " for the work desired. This should never be 
done verbally, but should always be a written order on a 
standard form and should definitely describe the work to be 
accomplished. The shop order should bear the same charge 
number as the production order. 

In Fig. 2 is shown a shop-order form for output work, 
which has given satisfaction. In Fig. 3 a shop-order form 
for expense-account work is shown. It will be noted that the 
order for the output work does not require approval, while 
the expense-account work requires the approval of the shop 
superintendent. 

MUSTERING THE WORKMEN. 

There are several satisfactory methods for mustering the 
workmen. When the plant consists of a number of shops 
more or less scattered, it is necessary to have a check at the 
workmen's entrance and also at their places of work. This 
can best be done in the following manner : A brass-numbered 
check is issued to each workman, the number being the work- 
man's number for the payroll, for tool issues and for charg- 
ing time. Check boards, one for each shop or trade, are at 
the entrance to the plant, and the workman as he comes in 
hangs the check on a hook under his number ; when he goes 
out he removes the check. In this way the checks also serve 
as a pass into the works. The illustration, Fig. 4, shows the 
checking station for a large establishment with scattered 
shops. When the muster is over, on muster-check cards the 
numbers that have not mustered are noted and these cards 



PRODUCTION ORDER AND COST SECTION RECORDS 6 1 




62 COST KEEPING AND SCIENTIFIC MANAGEMENT 

are sent to the office to be checked against the muster-carcl re- 
ports from the shops. 

Employees arriving late are passed in on special reports 
made by the gate keeper to the main time office ; those leaving 
at other than the regular quitting time are passed out on fore- 
man's passes which are taken up at the gate and turned in to 
the main office. 

In the shops and other places of work there are registering 
clocks on which each workman is required to register arrival 
and departure. The clocks also serve to register on the serv- 
ice cards the time of beginning and completing each job. If 
the clocks are used for the latter purpose, more than one 
clock will be required for each shop, unless the shop is small, 
or much time will be lost in workmen going from work to 
the clock. In shipyards a number of clocks must be main- 
tained for outside work, so that the workman may register 
where he is working. 

When it is desired to shift a workman from one place to 
another a notice to register the next muster at a designated 
station is placed on his number at the clock and his muster 
card is placed at the new station. 

The payroll is made up by the time section from the muster 
cards as registered by the clocks. The cost records are made 
up separately by the cost section from the service cards. The 
daily charges to jobs as taken from the service cards must 
check with the total daily payroll entries from the muster 
cards. 

In plants where the work is not widely scattered or where 
the number of workmen is small, the use of brass checks at 
the entrance gate may be dispensed with, as the clock muster 
will fill all requirements. 

RECORD OF LABOR CHARGES. 

The time of all employees must be charged to either a pro- 
duction-job order or an expense order. This should be done 
by means of the service card. On these are given the job-order 
number, a brief statement of the work, the workman's name, 



PRODUCTION ORDER AND COST SECTION RECORDS 63 

check number and rate of pay, the hour of beginning and stop- 
ping the work and the time employed. There is a separate 
card for each job and new cards each day. The cards of the 
day are sent each night to the main office; when work is not 
completed the card is marked " not finished " and a new dupli- 
cate card is made out for the next day. 

These cards should be made out for the workmen, except 
for the time of starting and stopping a job, and these times 
should be recorded by the workmen with the registering clocks. 
The cards should be examined by the sub- foreman in charge 
and if correct should be initialed by him. 

Jobs of work and the corresponding card should always be 
kept ahead of each workman, so that there will be no delays 
on account of waiting for work. In small shops where there 
is no routing system, the service cards may be made out by 
the workman. A service card of a different color should be 
used for over-time work. 

In the main office the cards of each shop, trade or depart- 
ment are sorted by job numbers, and the charge for labor 
for the day for the shop, trade or department is transferred 
to the job-order card, which is described below. The service 
cards are filed by job-order numbers. 

RECORD OF MATERIAL CHARGES. 

Material is obtained by means of requisitions on the store- 
keeper. A separate requisition is made for each job num- 
ber, in triplicate, one copy being retained by the shop as a 
record and also for checking material when received, and two 
copies go to the storekeeper. The prices are entered on these, 
and one is sent to the cost department, the other being retained 
by the store as a voucher for the issue. 

Miscellaneous minor material is obtained from the shop 
store on minor-material slips. Once a week these are col- 
lected by job numbers, and regular requisitions in duplicate 
are sent to the storekeeper to cover the issues. These are 
priced and sent to the cost department. This method allows 
miscellaneous minor material to be secured without delay and 



64 COST KEEPING AND SCIENTIFIC MANAGEMENT 

also reduces the paper work by making but one requisition 
for a number of small items required during the week. 

Material drawn out for a job but not used must be credited 
to the job. This is done by returning the material to store 
with a credit requisition. The same form is used for credit 
material as for material drawn, except that the requisition 
has written across its face, " Credit Material." The material 
is taken up on the books of the storekeeper, the requisition 
is priced and a copy sent to the cost department and is en- 
tered as credit material on the cost-of-work card. If the 
excess material can be used on another job in the shop, the 
credit requisition sent to the storekeeper is accompanied by 
a regular requisition charging the same material to the new 
job and the material is retained in the shop. 

LABOR AND MATERIAL CHARGED TO EXPENSE ORDERS. 

Charges for labor and material to the expense orders are 
made exactly as for production orders, as outlined above. 
The charges for supervisory force, general labor, issuing 
tools, grinding tools, small repairs, and miscellaneous material 
are made without any special orders, and are charged to 
standing expense orders which will be given later. 

Large repairs, while chargeable to the expense accounts, 
should be made to special expense orders in order that the 
cost of each job may be ascertained. These charges are 
transferred at the end of the month to the proper expense 
account and are distributed to the production orders with the 
other expenses. 

COST SECTION RECORDS. 

The cost section receives each day the service cards show- 
ing the distribution of labor to each production order and each 
expense order, and receives from the storekeeper the priced 
requisitions of material issued for each order. 

To record these there are required for each order, whether 
production or expense, a " job order " card, a " cost of work " 
card, and a " summary of material requisitions " card. 



PRODUCTION ORDER AND COST SECTION RECORDS 65 

With these three sets of cards the costs can be kept with a 
small amount of clerical labor, and in a way that will give the 
manager the information that he requires. 

JOB-ORDER CARD. 

By means of the job-order cards the direct labor expendi- 
tures are distributed daily to the various orders by shops, 
trades or departments, as desired. The card is ruled in con- 
venient form to show under each shop, trade or department 
the daily expenditures for direct labor and the total to date, 
and also the estimated cost of the work. A convenient form 
for this purpose is shown in Figs. 5 and 6. 

The expenditures in each shop are taken from the service 
cards and entered on the job-order card. At the end of the 
month the total labor expenditure in each shop is entered in 
the next to the last column of the job-order card. With the 
expense rates for each shop the indirect charges are entered 
for each shop in the last column and the total indirect charges 
determined, and these are transferred, together with the total 
direct-labor charges, to the cost-of-work card. 

The information given on the job-order cards can be made 
of much value. In my work I have required that these cards 
be delivered each afternoon at four o'clock to the assistant 
naval constructor in general charge of the work, and by means 
of the information thus obtained he is able, as described in 
a previous chapter, to keep in close touch with the work and 
the daily charges. The cards are collected at eight o'clock 
the next morning and returned to the cost section. 

COST FIGURES SHOULD BE USED, AND NOT TREATED AS MERE 

RECORDS. 

At this time I wish to point out that there is always 
strenuous objection from a cost department to any system 
or scheme which will take records from the files of that de- 
partment. It will be stated that records will be lost and that 
such a system will greatly interfere with the work of the cost 
department. 



66 



COST KEEPING AND SCIENTIFIC MANAGEMENT 







c 




L- 














































































iD 














































































- 
c 

+ 

J, 


1 

3 


5 












S 2 

1 ~ 

E 5 


L- 




















































































^ 


















































< 


o 

EH 
















































re 






































Ft 


























































-^ 






































E 5 

a n 

t s 

o 

Eh 

o 

15 S 
E | 

'— — 
to a 

H ■= 

e| 

"S 

o 

1 

| 

- 
Hi 

3» 


s 


























































=— 
































































































2 










































































£ 






















~ 










































































v- 

N 


















JZ 














































































§5 




















t- 










































































£ 












Job Order Card Objct 
, I<)1 Snbtitln 












ts 










































































s 






















L- 










































































£ 






















— 










































































3 






















rt 










































































~- 






















-*j 










































































s 






















- 










































































— 






















— 
-x 


s 

3 


& 


- 




s 


| 




s 


1 


| 


i 


3 

X 


1 

S 


■ 


E 


1 

t 

1 
2 


■I 


- 
— 


X 












i = 












* 3 


s s 1 5 J 


































9- 

X 


= 


j 


i 

1 


i 


i 


- 


1 i 


S 


-a 

B 


5 
| 


/. 


a 

go 


2 
s 


I 

5. 


1 

= 


i 
£ 


"3 

O 





PRODUCTION ORDEK AND COST SECTION RECORDS by 

Here again the important objective is forgotten or over- 
shadowed by unimportant or petty details. Far too often 
the cost department sees only the importance of the costs as 
records, and the importance of these records in carrying out 
the real work of the factory is not realized. Unfortunately 
in the great majority of cases the influence of the cost de- 
partment is such that its ideas prevail, and the records of cost 
might as well be kept in sealed glass cases for all the good 
they do in giving information to those who are directly re- 
sponsible for the work and its cost. 

There is no reason why the record cards should be lost, 
but even if a card should be lost now and then, new cards 
can be made with but little clerical labor. It may not please 
the cost section, but what does it matter if the cards become 
"dog-eared" and dirty; it only shows that they are serving 
their legitimate purpose. 

The manager should hold the cost department with a firm 
hand and make that department understand that its principal 
duty is to furnish information to the superintendents, heads 
of departments, and foremen. 

Everywhere there is the same complaint from the factory 
proper of difficulty in obtaining promptly information from 
the cost department, and in the majority of places those who 
are responsible for the work have ceased to struggle for in- 
formation regarding costs. 

Usually the costs are records, and nothing but records, 
and are but little more value than waste paper so far as giv- 
ing assistance in the efficient production of the work. 

THE COST-OF-W r ORK CARD. 

A convenient form for the cost-of-work card is shown in 
Fig. 7. On this card there are entered each month, the direct 
labor and the indirect charges for the month, which are ob- 
tained from the job-order card, and the totals to the end of 
the month ; the material cost for the month, which includes 
storehouse expense, and the net total cost of material, which 
includes deductions for " credit material," which data are ob- 



68 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



tained from the summary-of-material-requisition cards. The 
cost-of-work cards not only show current monthly charges 
under the three heads, labor, material and indirect charges, 















1 

o 


Z 




Fiscal Year 191 


£ 


1 

M 

u 

o 

M 

— 


Cost per Month 


Total Cost Including Month 


a 
1 






Labor 


Material 


Indirect 


Total 


Labor 


Material 


Indirect 


Total 


July 


































Aug. 


































i 1 


Sep. 


































Labo 
Mate 
Indir 
Total 

Tlm« 


Oct. 


































Nov. 


































Dec. 




































I 




m 

O 


Jan. 


































Feb. 


































Mar. 


































Apr. 


































I 


May 


































1 *s 


June 




































< s. 






Q 


< 


<5 





































Fig. 7. Cost of Work Card, Front. Back is similar, but without the 

order brief. 

but also show the total cost to the end of the month under 
each of these heads. The estimated cost of the work is also 
given on this card. 



SUMMARY OF MATERIAL REQUISITIONS. 

The priced requisitions for material are received by the 
cost section from the storekeeper as the issues are made. 
At the end of the month the requisitions for the month are 
clipped together, and the total of the issues made up. On 
the " Summary of Material Requisitions " card, Fig. 8, the 
numbers of the requisitions and the value of the monthly 
issue are entered. The storehouse expense percentage is ap- 
plied and the total cost of the material determined. To this 
is added the prior cost, and the credit material is subtracted, 
giving the total net cost of material to the end of the month. 
No allowance or credit for storehouse expense is made on 
returned material. 

The value of the monthly issues and also the total material 
cost to the end of the month are transferred to the cost-of- 



PRODUCTION ORDER AND COST SECTION RECORDS 



69 



work card. The material requisitions clipped together by 
months are filed with the summary card. 

At the end of each month the storekeeper furnishes the 
cost department with a summary of the material issued during 
the month and the total of the material charged must check 
with the total given on the summary. 



1 1 
H- 

ill 

1 j| 

a ;« 
© ! 5. 
































Requisition Cost 


July 


Aug. 


Sep. 


Oct. 


Nov. 


Dec. 












































Store Expenses % 














Cost per Month 












































Previous Cost 












































Total 












































Credit Material 














Cost to end Month 












































Requisition Cost 


Jan. 


Feb. 


Mar. 


Apr. 


May. 


June 












































a • 

s ; 

5 
•8 

•■a 
































Store Expenses 96 














Cost per Month 












































Previous Cost 












































Total 














Credit Material 












































Cost to end Month 















Fig. 8. Summary of Material Requisitions Record Card. 

It will be noted that but little clerical work is required 
in recording the material to be charged to each job. There 
is no copying of material items; the original requisitions 
serve for checking the materials in the shop, for a voucher 
to the storekeeper for the issue, and also as a cost record. 
If it is desired to know in detail the material charged to a 
job the original requisitions filed with the summary card 
give this; if only the value is required, it is shown on the cost- 
of-work card. 



ADVANTAGES AND DISADVANTAGES. 

The job-order card shows the expenditures for direct labor 
day by day, and can be checked each day as the work pro- 
gresses. The cost-of-work card shows the total expenditures 
month by month, but gives no details of labor or material. 
If these are required the job-order card and the material 



JO COST KEEPING AND SCIENTIFIC MANAGEMENT 

requisitions must be consulted. If it is desired to obtain 
the cost to date of a job at any time except the end of the 
month, this cannot be done directly ; it is necessary to take 
from the cost-of-work card the cost to the beginning of the 
month and add the following: direct labor from the job-order 
card and the estimated indirect charges, direct material from 
the current month's requisitions plus the percentage of store- 
house expense. This, however, can be done very quickly. 

Any system which requires daily entries to the cost-of- 
work card for labor and material involves a large amount 
of clerical work, and also requires a large and unhandy 
record card. The system described is very simple, requires 
but little clerical work, and will give very satisfactory re- 
sults. 



CHAPTER VI 

Indirect Charges 

The indirect charges will be taken up under general ex- 
pense ; shop expense ; power, heat and light ; storehouse ex- 
pense; part plant development; selling expense. 

Each shop will be designated by a letter, as " B " for the 
boat shop, " M " for the machine shop, " S " for the smith 
shop, " P " for the pattern shop, etc. The letter " G " will 
designate general expense, and " S " will be the symbol for 
shop expense. The letter " G " followed by other symbols 
will designate the various general expense accounts, while 
the letter " S " followed by other symbols designates the 
various shop expense accounts. For example, " SB " is the 
designation for the shop expense account of the boat shop, 
" SM " for the machine shop, " SS " for the smith shop, 
" SP " for the pattern shop, etc. The subdivisions under 
each of the general heads will be designated by additional 
letters, as " SMA " supervisory force of machine shop, 
" SMD " dressing and grinding machine shop tools, etc. 
The symbols used for a subdivision should be the same in 
all shops ; for example, " D " is the symbol selected for dress- 
ing and grinding tools and " SMD " is the charge symbol for 
dressing and grinding machine shop tools, then " SSD " should 
be the charge symbol for dressing and grinding smith shop 
tools, and " SPD " for the pattern shop, etc. 

G GENERAL EXPENSE. 

Includes salaries of general officers and main-office expense, 
except those chargeable to selling expense and storehouse 
expense. Includes fixed charges that cannot be located 
against a shop or department. Includes labor and material 

7i 



J2 COST KEEPING AND SCIENTIFIC MANAGEMENT 

expended for the repair and maintenance of buildings and 
equipment which cannot be located against a shop or depart- 
ment. Covers all expenditures, the details of which are given 
below under the subheads : 

GA Salaries of general officers and assistants, excluding 
storehouse and sales department. 

GB Office salaries : Salaries of clerks, messengers, stenog- 
raphers, janitors and others employed in the general office. 
Does not include any salaries in storehouse or sales de- 
partment. 

GC Cleaning and care of yard outside of shops: Labor 
and material expended in cleaning yard. Includes cost 
of men driving teams for cleaning purposes, but does not 
include any general stable expense. 

GD Drawing office: Salaries of chief draftsmen and 
others in drawing office when not chargeable direct to 
output; all drawing-office material; details given under 
subheads. No charges are made direct to GD, but must 
be made to subhead symbols. 

GE Experiments for the benefit of engineering or manu- 
facturing: Includes labor and material required to make 
experiments for the benefit of the economical administra- 
tion of the plant, but does not include costs of experi- 
ments for the benefit of a production order, which should 
be charged direct. No charges will be made to this num- 
ber except by order from the office. 

GG Repairs and maintenance of floating property: In- 
cludes labor and material expended in the repair and 
maintenance of floating property, such as pile drivers, 
dredges, floats, barges, derricks and launches. 

GH Hauling, handling stores and shipments: The cost of 
hauling and handling material from shop to shop when 
impracticable to make charges direct to production or- 
ders. The cost of boxing and handling for shipment 
and cost of outgoing freight when impracticable to charge 
direct to production orders. Does not include hauling 



INDIRECT CHARGES J7> 

and handling material for storehouse which should be 
charged to storehouse expense. Does not include cost of 
railway freight service. 

GI Stable expense: Includes expense of upkeep of horses, 
wagons, etc. Drivers should be charged to production 
orders or to other expense orders. 

GJ Legal expense. 

GK Dues and assessments for associations and societies. 

GL Leave and holidays : Includes pay for officers and oth- 
ers for holidays given with pay. 

GM. Patents: Cost of obtaining and keeping alive. 

GN Telephone and telegraph : Includes all expenses in- 
curred for telephone and telegraph, which are not charge- 
able to storehouse or sales department. Includes re- 
pairs, maintenance and operation of yard telephone service. 

GO General office fixtures and furniture : Labor and ma- 
terial for repairs to fixtures and furniture in general 
offices, not including drawing office, storehouse or sales 
department. Includes repairs to desks, cabinets, carpets, 
clocks, bells, safes, calculating machines, window shades, 
file cases, etc. 

GP Plant repairs outside of shops : Labor and material 
for repair of machinery and equipment outside of shops, 
or which is not for the use of a single shop. Includes 
cranes, derricks (not floating), locomotives, locomotive 
cranes, railroad equipment (not including tracks), etc. 
Does not include labor and material for running these ap- 
pliances. Repairs estimated to exceed $100 will be made 
on special orders and charged to this account. These 
orders will carry no indirect charges. 

GO Operation of plant equipment outside of shops: Labor 
and material for the operation of railway service, loco- 
motive cranes, derricks, cranes and launches when it is 
impracticable to make charges direct to production orders. 

GR Roads, railway tracks, wharves, and general yard re- 
pairs : Labor and material for repair and maintenance 
of walks, roads, subways, railroad tracks, plate racks, 



74 COST KEEPING AND SCIENTIFIC MANAGEMENT 

piers and wharves, sewers, fire protection system (not 
including water system), fences, weighing apparatus, etc. 
Repairs estimated to exceed $100 will be made to special 
orders and charged to this account. These orders will 
carry no indirect charges. 

GS Office supplies and postage: Includes all supplies re- 
quired for the general offices, not including shop, draw- 
ing room, storehouse, or sales department offices. In- 
cludes books, stationery, postage, newspaper and maga- 
zine subscriptions, etc. 

GT Traveling expenses : Traveling expenses not chargea- 
ble to a particular product and not for the benefit of sales. 

GU 

GV Miscellaneous: To cover cost of miscellaneous special 
expenses, such as bad debts, entertaining, etc. No charges 
to be made to this number without an order from the man- 
ager. 

GW Watchmen: Labor and material for watchman serv- 
ice. 

GX Part plant development : One-half of cost of charges 
made under " XG " orders which are not chargeable to any 
shop or department. 

GY 

GZ Repairs and maintenance of buildings : Labor and ma- 
terial expended for repairs to buildings, crane runways, 
lavatories outside of shops, wiring and lights main of- 
fice, etc., which are not chargeable to shop expense or 
storehouse expense. Repairs estimated to exceed $100 
will be made on special orders and charged to this account. 
These orders will not carry any indirect expense. 

GF Fixed charges: Such as interest, depreciation, taxes, 
insurance, not chargeable to shops. or departments, as per 
subheads given below : 

GFD Depreciation not chargeable to a shop or de- 
partment. 
GFF Fire and accident insurance not chargeable to 
a shop or department. 



INDIRECT CHARGES 75 

GFI Interest on investment not chargeable to a shop 
or department. 

GFN Indemnity insurance not chargeable to a shop 
or department. 

GFT Taxes not chargeable to a shop or department. 
GD Drawing Office : 

GDA Miscellaneous wages: Includes the pay of 
chief draftsman and leading draftsmen and those 
stowing and recording plans; includes pay of 
blueprinters ; includes the pay of all draftsmen 
who cannot be charged to production orders, or 
to the estimating department. 

GDB Fixtures and furniture: Includes labor and 
material expended for repairs and maintenance of 
drawing tables, fixtures and furniture, and draw- 
ing instruments. 

GDC Wages of estimating department: Includes the 
pay of the estimating department and draftsmen en- 
gaged on estimates when these charges cannot be 
made direct to production orders or to the sales 
department. 

GDS Stores and supplies: Includes all stores and 
supplies, such as ink, paper, tracing cloth, station- 
ery, etc., used in the drawing office and estimating 
department. 

S SHOP EXPENSE. 

The subdivision of the shop expense accounts for the dif- 
ferent shops is very similar, and to save space those of but 
one shop, the machine shop, will be given. 

SM Shop Expense, Machine Shop: 

SMA Supervisory and office force: Includes wages 
paid to foremen, assistant foremen, and all men 
acting in a supervisory capacity. Includes the pay 
of planners, clerks, messengers and others employed 
in the shop office. 



COST KEEPING AND SCIENTIFIC MANAGEMENT 

SMB Miscellaneous labor: \Yages which it is im- 
practicable to charge to production orders, such 
as shop cleaners, crane operators, move men. gen- 
eral floor helpers, etc., but does not include any 
labor that can be charged to other SM orders. 

SMC Fixtures and furniture : Labor and material 
for repair and maintenance of fixtures and fur- 
niture, both fixed and movable, such as benches, 
shelving, desks, stools, clocks, bells, trays, tote 
boxes, hand carts, etc. Any changes or additions 
will only be made on order from the office. Re- 
pairs estimated to exceed $50 will be made on spe- 
cial orders and charged to this account. These 
orders will not carry indirect charges. 

SMD Dressing and grinding old tools : Includes 
the dressing and grinding of old tools only and 
the transportation to and from the shop. The 
dressing and grinding of new tools is not included 
in this order, this work being charged to the order 
for the manufacture of the tools. Charges are 
to be made against the shop using the tools and 
not against the shop doing the work. 

SME Maintenance of small and loose tool equip- 
ment : Repair of large loose tools, such as vises, 
hydraulic jacks, pulley blocks, anvils, etc. Re- 
pairs to pneumatic tools and pneumatic hoists are 
not to be charged to this order. Includes repair 
(not dressing and grinding) of small tools; in- 
cludes the purchase or manufacture of such tools, 
as drills, chisels, files, milling cutters, taps, dies, 
planer, lathe and shaper tools, etc., when such 
tools merely maintain and do not increase the tool- 
room stock. Tools that increase the stock will be 
supplied on written orders from the main office 
and charged to XM orders. Charges must be 
made to the shop that is to use the tools and not 
to the shop that does the work. 



INDIRECT CHARGES JJ 

SMG Special tools : Repairs and maintenance of 
jigs, dies, gauges, templets, etc. Only covers re- 
pairs and replacements and not additions. Charges 
are to be made to the shop which is to use the 
tools and not against the shop that does the work. 
Repairs estimated to exceed $100 will be made on 
special orders and charged to this account. These 
orders will not carry indirect charges. 

SMH Pneumatic tools and hose : Repair and main- 
tenance of the pneumatic tools for the machine 
shop and machine shop force working outside of 
the shop, such as drills, hammers, and air motors 
for driving boring bars. Includes cost of air hose 
for machine shop. Does not include pneumatic 
hoists, which are chargeable to SMK. 

SMI Belting: Repairs and maintenance of belting. 
Includes new belting for replacing old, belt 
lacing, glue, tools, etc. Charges for new belting 
with new equipment are to be made to specific or- 
ders. 

SMJ Power transmission: Includes labor and ma- 
terial for the maintenance, repair and operation of 
line shafting, countershafting, piping and wiring 
inside of shops for the transmission of power. In- 
cludes motors not forming a part of a machine 
tool, includes electric controllers not forming a 
part of a machine tool. Does not include belting. 
Does not include repairs to light wiring nor radia- 
tors. Repairs estimated to exceed $100 will be 
made on special orders and charged to this ac- 
count. These orders will not carry indirect 
charges. 

SMK Cranes, hoists and elevators : Includes labor 
and material for repairs and maintenance of cranes, 
hoists and elevators. Includes pneumatic hoists. 
Does not include cost of operation. Repairs es- 
timated to exceed $100 will be made on special or- 



78 COST KEEPING AND SCIENTIFIC MANAGEMENT 

ders and charged to this account. These orders 
will not carry indirect charges. 
SML 

SMM Repairs to machine tools: Includes labor 
and material for repairs to machine tools. Where 
motors are direct connected and form a part of 
the machine, repairs to motors and controllers will 
be charged to this order. Repairs estimated to 
exceed $100 will be made on special orders and 
charged to this account. These orders will not 
carry indirect charges. 

SMN 

SMO 

SMP Power, heat and light: Monthly cost or pro- 
portionate share of power, heat and light. No 
charges will be made direct to this order. At the 
end of each month the cost of machine-shop power 
will be transferred from the power account to this 
account. 

SMR Correction of errors : Labor and material re- 
quired to correct errors made by the machine shop. 
All errors must be reported and the correction 
charged to this number. Correction of errors es- 
timated to cost in excess of $50 will be done on 
special orders and charged to this account. These 
orders will carry no indirect charges. 

SMS General stores and supplies: Includes mis- 
cellaneous material, such as waste, oil, brooms, 
etc., for the use of the shop. Also material used 
on output which, on account of its character and 
the small quantities used on each job, cannot be 
charged direct. 

SMT Operations of tool room: Includes wages of 
men working in the tool issue room, also the tool 
boys. Does not include labor of toolmakers, 
which should be charged to work on which en- 
gaged. 



INDIRECT CHARGES 79 

SMX Part plant development: Monthly charges 
for one-half the part plant development charges 
for the benefit of the machine shop. No charges 
are made direct to this order. At the end of each 
month one-half of the charges against XM orders 
are transferred to this account. 
SMZ Repairs and maintenance of buildings: In- 
cludes labor and material expended in the repair 
and maintenance of machine-shop buildings, crane 
runways, foundations for machine shops, inside 
drains and sewers, lavatories in shop, plumbing, 
radiators in shop, light wiring in shop, globes, 
lamps and carbons. Repairs estimated to exceed 
$100 will be done on special orders and charged to 
this account. These orders will carry no indirect 
charges. 
SMF Machine-shop fixed charges : As given in sub- 
heads which follow: 

SMFD Depreciation of machine-shop build- 
ings, machinery, equipment and tools. 
SMFF Fire and accident insurance on ma- 
chine-shop buildings and equipment. 
SMFI Interest on money invested in machine- 
shop land, buildings and equipment. 
SMFN Indemnity insurance for machine- 
shop force. 
SMFT Taxes on machine-shop land, build- 
ings and equipment. 

P POWER, HEAT AND LIGHT. 

PA Power-house labor : All labor connected with the op- 
eration of boilers, engines, generators, air compressors 
and other power machinery. Includes salary of engineer 
in charge. Does not include labor or repairs except when 
repairs are made by the regular power-house attendants. 
Does not include repairs and attendance of wiring and 
piping outside of power station for the transmission of 
power. 



SO COST KEEPING AND SCIENTIFIC MANAGEMENT 

PB Repairs to boilers: Labor and material for repairs to 
boilers, uptakes, stacks, boiler fittings, injectors, feed 
pumps, water heaters, coal and ash-handling apparatus, 
or oil pumps and burners. Repairs estimated to exceed 
$100 will be made on special orders and charged to this 
account. These orders will not carry indirect charges. 

PC Repairs to air compressors : Labor and material for 
repairs to compressors, intercoolers and outercoolers. 
Repairs estimated to exceed $100 will be made on special 
orders and charged to this account. These orders will 
not carry indirect charges. 

PD Distributing system, electric : Labor and material for 
repairs and attendance on electrical distributing system 
outside of power plants and outside of shops. Includes 
wiring, poles, static transformers, conduits and lamps out- 
side of shops. Repairs estimated to cost in excess of 
$100 will be made on special orders and charged to this 
account. These orders will not carry indirect charges. 

PE Repairs to electric generators, switchboard and wiring- 
inside of power station: Labor and material for repairs 
to electric generators and engines driving same, switch- 
board, and wiring inside of power house. Repairs esti- 
mated to cost in excess of $100 will be made on special 
orders and charged to this account. These orders will not 
carry indirect charges. 

PF Power-house fuel: Cost of fuel, including labor for 
handling same. Cost of removing ashes. 

PG Distributing system, steam: Labor and material for 
repairs and attendance for the steam-distributing system, in- 
cluding heating lines, from power house to shops. Repairs 
estimated to exceed $100 will be made on special orders 
and charged to this account. These orders will carry no 
indirect charges. 

PH Repairs to hydraulic machinery: Labor and material 
for repairs to hydraulic pumps and motors driving same, 
and accumulators. Repairs costing in excess of $100 will 



INDIRECT CHARGES 8l 

be made on special orders and charged to this account. 
These orders will not carry indirect charges. 

PI Distributing system, hydraulic : Labor and material for 
repairs and attendance for the hydraulic distributing sys- 
tem from power house to shops. Includes accumulators 
outside of power plant. Repairs estimated to cost in ex- 
cess of $100 will be made on special orders and charged 
to this account. These orders will not carry indirect 
charges. 

PM Repairs to miscellaneous machinery. Labor and ma- 
terial for repairs to miscellaneous machinery not included 
under other numbers, such as condensers, air pumps, 
cranes, motors, transformers and other auxiliary machin- 
ery. Repairs estimated to cost in excess of $100 will be 
made on special orders and charged to this account. These 
orders will not carry indirect charges. 

PN Distributing system, pneumatic : Labor and material 
for repairs and attendance on pneumatic distributing sys- 
tem from the power house to the shops. Includes supply 
of hose and portable pipe lines run for the benefit of 
several shops or a number of different jobs. Includes 
cost of inspectors for waste of air and abuse of air tools. 
Repairs estimated to cost in excess of $100 will be made 
on special orders and charged to this account. These or- 
ders will carry no indirect charges. 

PO Lubricating oil : Cost of lubricating oil for power 
plant, including cost of handling. 

PP Repairs to piping: Labor and material for repairs to 
all piping inside of power plant. Repairs estimated to 
cost in excess of $100 will be made on special orders and 
charged to this account. These orders will carry no in- 
direct charges. 

PO . Repairs to water system: Labor and material for re- 
pairs to water systems from power house and outside of 
shops. Does not include cost of water purchased, which 
is charged to PS. Repairs estimated to exceed $100 will 



82 COST KEEPING AND SCIENTIFIC MANAGEMENT 

be made on special orders and charged to this account. 
These orders will carry no indirect charges. 

PR Fixtures, furniture and tools : Labor and material for 
repair and maintenance of fixtures, furniture and tools 
in power house, such as desks, chairs, lockers, shovels, 
scrapers, flue cleaners, wrenches, jacks, etc. 

PS Stores and supplies : All stores and supplies for power 
plant except fuel and lubricating oils. Includes waste, 
packing, stationery, water, brooms, brushes, soap, boiler 
compounds, etc. 

PT Interest: Monthly charge for interest on money in- 
vested in land, buildings, machinery, tools and equipment 
of power house and power lines. 

PU Depreciation: Monthly charge for depreciation of 
buildings, tools and equipment of power house and power 
lines. 

PV Taxes: Monthly charge for taxes on land, buildings, 
tools and equipment of power house and power lines. 

PW Insurance : Monthly charge for insurance of power 
plant and equipment. 

PY Electric current purchased : Cost of electric current 
purchased from outside plants. 

PZ Repairs and maintenance of power-house buildings : 
Includes labor and material expended in the repair and 
maintenance of power-house buildings, crane runways, 
foundations for boilers, engines and other machinery, 
inside drains and sewers, lavatories, plumbing, radiators, 
light wiring, lamps and carbons. Repairs estimated to 
cost in excess of $100 will be made on special orders and 
charged to this account. These orders will carry no indi- 
rect charges. 

DISTRIBUTION OF POWER EXPENSE. 

The total of all " P " charges — power-house expense — 
is each month distributed to the various shops and the store- 
house, in accordance with the estimated amount of power 
that has been used bv each. No distribution is made to 



INDIRECT CHARGES 83 

" general expense," though a small part has been used for 
heating and lighting the main offices. The amounts so dis- 
tributed are taken up in the proper account under shop ex- 
pense or storehouse expense. 



H STOREHOUSE EXPENSE. 

HA Salaries of officers of storehouse and purchasing de- 
partment. 

HB Salaries of clerks, stenographers, messengers and jani- 
tors. 

HC Salaries of storehouse labor not included in HA and 
HB. 

HD Handling stores : Labor and material for handling 
stores to and from storehouse, not including regular store 
men. Includes drivers for teams and operators of loco- 
motive cranes when handling stores. Special orders will 
be issued for handling quantities of heavy or bulky ma- 
terial and the cost located direct to the cost of the ma- 
terial. 

HE Inspecting and testing : Labor and material for testing 
and inspecting material delivered. Includes cost of chem- 
ical analyses and physical tests. 

HF Repairs to fixtures and furniture : Labor and material 
for maintenance of office and storehouse furniture and 
fixtures, including shelving, bells, clocks, elevators, speak- 
ing tubes, tools, typewriters, comptometers, etc. Repairs 
estimated to exceed $50 will be made on special orders 
and charged to this account. These orders do not carry 
any indirect charges. 

HI Insurance: Monthly charge for insurance of store- 
house buildings and stock. 

HJ Depreciation of buildings : Monthly charge for depre- 
ciation of storehouse buildings. Does not include waste 
and depreciation of stock. 

HK Depreciation and waste of stock: Monthly charge for 
depreciation and waste of storehouse stock. 



84 COST KEEPING AND SCIENTIFIC MANAGEMENT 

HL Interest : Monthly charge for interest on money in- 
vested in storehouse buildings and stock. 

HM Freight and express : Expenses for incoming freight 
and express when it is not practicable to locate this direct 
to the material. When practicable the freight or express 
will be added to the purchase price of the material. 

HP Power, light and heat: Proportionate share of power- 
house expense. No charges are to be made to this order, 
direct, but at the end of each month the amount charged 
will be transferred to this account from the power ac- 
count. 

HS Office supplies and expenses: Includes all office and 
storehouse supplies, including stationery, books, brooms, 
etc. Includes expense of telegrams, postage and telephones 
for the benefit of the storehouse. 

HT Taxes : Monthly charge for taxes due to storehouse 
land, buildings and stock. 

HZ Repairs and maintenance of storehouse buildings: In- 
cludes labor and material expended in the repair and 
maintenance of storehouse buildings, lavatories, plumbing, 
wiring and lights, drains and sewers inside of buildings. 
Repairs estimated to exceed $100 will be made on special 
orders and charged to this account. These orders will 
not carry any indirect charges. 

DISTRIBUTION OF STOREHOUSE EXPENSE. 

No indirect charges will be made to any storehouse orders, 
as these are in themselves indirect charges. The storehouse 
expense will be distributed on the basis of the value of stores 
issued to the manufacturing department. In the cost depart- 
ment, at the end of each month a percentage will be added to the 
total cost of material drawn from store during the month for 
each order. This percentage is based on previous experience. 
A loss and gain account will be kept, showing each month the 
total expense charged to job orders and the actual expense, 
and the percentages used will be corrected from time to time 
so as to keep this account approximately balanced. 



INDIRECT CHARGES 85 

The depreciation of the storehouse buildings will be carried 
to the regular depreciation account. The depreciation and 
waste of stock will be taken up in a separate account which 
will be credited with losses in stock, shown by inventory, and 
the account at the end of the year will be closed into profit and 
loss. 

X PART PLANT DEVELOPMENT. 

Includes the cost of articles manufactured or purchased 
which, while they add to the equipment and increase the plant 
valuation, are of such a nature that their life is short. These 
are small and loose tools, pneumatic tools, fixtures and furni- 
ture, which are not replacements, but add to the stock, also 
new patterns, which cannot be charged to production orders. 
One-half of the charges under this account are carried each 
month to the proper shop expense or to general expense, and 
the remainder is taken up under special capital accounts which 
are eliminated in two years by depreciation charges. No 
charges will be made to part plant development accounts ex- 
cept on specific written order from the manager. There 
should be no standing job orders under this account, for if 
used, work which is in reality expense account work will prob- 
ably be charged to these orders. 

Job orders for work under this account are numbered with 
numerals followed with designating letters showing the shop 
or general expense account. For example, the order for ad- 
ditional small tools for the machine shop will be numbered 
125XM; and the order for additional forges for the smith 
shop will be numbered 126XS. 

The part of the account which is taken up under the capital 
account is considered as " output " of the factory and as such 
carries its proportion of the indirect charges, while the part 
transferred to the expense accounts, being itself an expense, 
does not carry indirect charges. In other words, one-half of 
the X charges carry indirect charges and one-half do not. 



86 COST KEEPING AND SCIENTIFIC MANAGEMENT 



PLANT DEVELOPMENT. 

Work done for plant development should be treated as if 
the work were for a customer. Output job orders should be 
issued and the cost should include indirect costs. The total 
cost of each job or undertaking should be taken up under ap- 
propriate sub-accounts of the capital account. Care should 
be exercised that no work which does not give a real increase 
in the value of the plant is considered as plant development. 

E SELLING EXPENSE. 

Includes all expenses incurred in selling the product, such 
as salaries, advertising, postage, traveling expenses, discounts, 
etc. Includes proportion of fixed charges for office building. 
Includes charges for services of estimating department and 
drawing office when for the benefit of sales. Details of the 
charges are given under the subheads : 

EA Salaries of officers of sales department. 

EB Salaries of salesmen. 

EC Salaries of clerks, stenographers, messengers and jani- 
tors. 

ED Discounts. 

EE Estimates: Expenses due to the preparation of plans 
and estimates for the benefit of sales. 

EF Repairs to fixtures and furniture of sales department. 

EG Advertising. 

ES Office supplies and expenses : Sales-department office 
supplies, including postage, telegrams and telephones. 

ET Traveling expenses for the benefit of sales. 

EU Fixed charges : Includes a monthly charge for rent of 
office room which includes depreciation, interest, taxes and 
, insurance. 

EV Miscellaneous: Includes expenses not otherwise classi- 
fied. Such as entertaining, etc. 



INDIRECT CHARGES 87 



DISTRIBUTION OF SELLING EXPENSE. 

In a manufacturing establishment the selling expense should 
each month be distributed to the product sold. The expense 
rate will be determined by dividing the total of the selling ex- 
pense by the value of the product sold; each sale should bear 
its proportion of the selling cost. 

In a jobbing repair shop, or in an establishment like a ship- 
yard, where there is both repair and construction work and 
where contracts require several years to complete, it is im- 
practicable to distribute the selling expense to the product sold. 
In these cases the selling expense should be treated as an ele- 
ment of general expense and distributed with it. 



CHAPTER VII 
Supervision of the Expense Accounts 

the disadvantage of superficial criticism. 

The relation of overhead charges to total cost is little under- 
stood except by experienced managers and by those who have 
made a study of the subject. An analysis and study of the 
overhead charges by a competent manager is necessary for the 
efficient working of an industrial plant. Superficial criticism 
of these charges, and action taken thereon, however, may re- 
sult in a decrease in efficiency. 

THE WORKS MANAGER VERSUS FINANCIAL CONTROL. 

In nearly all cases in industrial life the " operating ex- 
pense " is a bone of contention between the financial control 
and the works manager. In many cases — yes, in the major- 
ity — the financial end of the establishment knows nothing of 
shop management, but is well informed regarding accounting 
methods and knows the effect produced on stockholders and 
the general public by a statement of high operating expenses 
in the annual report. High operating expenses do not look 
well in financial reports, and it is often very difficult for the 
works management to persuade the financial power that in 
many cases high operating expenses result in efficiency and 
lower cost of the output. 

If the establishment is a manufacturing concern where the 
cost can be accurately determined, and compared with previ- 
ous costs, or with costs of competitors as shown by their 
selling price, the works manager has an opportunity to prove 
his side of the case, but if it is a jobbing concern, or a repair 
plant, where no such comparison can be made, the manager 
has little opportunity for proving his case, and he will, in 



SUPERVISION OF EXPENSE ACCOUNTS 89 

many cases, be required to reduce the operating expense, al- 
though he knows that such reduction means a loss to his com- 
pany. This is a disheartening experience which is forced on 
many managers. 

IGNORANCE OF THE RELATION OF OVERHEAD CHARGES TO 
TOTAL COST. 

The lack of knowledge of the relation existing between 
overhead expense and total cost is by no means confined to 
the financial power, as it even sometimes extends to managers 
themselves. It is astonishing how little is known concerning 
this subject. Some good business men — men who should 
know r — have failed to grasp the true meaning of overhead 
expense and its relation to the total cost. 

I know of one important repair establishment which makes 
large repairs for another concern on the basis of actual cost 
plus a percentage of profit. The manager of the concern for 
whom the repairs are made is considered an excellent business 
man who can drive a hard bargain. The manager of the re- 
pair establishment well knows that endless trouble will ensue 
if the bill presented contains the proper percentage of over- 
head charges, so the bill shows about half the actual overhead 
expense, with the direct charges padded to make up the bal- 
ance. 

Many actually do not know what goes to make up the over- 
head expense. Very few outside of experienced managers 
know that much productive labor, or to make it clearer, direct 
labor, cannot be charged directly to a job, as this labor is em- 
ployed on several jobs at the same time, and must necessarily 
be distributed to the jobs either on the basis of direct labor 
charged or on a tonnage basis. Many do not know that cer- 
tain material must be charged in the same way, and that this 
material, though it appears in the overhead charges, is actu- 
ally used on the job. 

I have heard those in a position to criticize, in a position 
where the criticism would be accepted as of value, express the 
most severe criticism of the management of a shop w r here the 



90 COST KEEPING AND SCIENTIFIC MANAGEMENT 

pro-rated charges, including general expense, amounted to 
ioo per cent., stating that it cost as much to run the shop as 
it did to do the work in the shop! It was thought that the 
overhead expense consisted of charges for the supervisory 
force, clerks, cost of power and minor repairs to tools. It 
was not considered that in any well-managed establishment, 
the overhead charges could amount to ioo per cent, of the 
labor charged. It is needless to say the one making this criti- 
cism never had the opportunity of analyzing the overhead 
charges in a large well-conducted foundry where costs are ac- 
curately determined. Such is the ignorance with which man- 
agers have to contend. 

DANGER OF SUPERFICIAL CRITICISM. 

In repair plants, or in establishments where work of large 
magnitude is undertaken which requires several years to com- 
plete, as in shipbuilding, it is difficult to compare costs or to 
measure the output. Frequently, also, the supreme control of 
the establishment is in a city office far distant from the plant, 
and knowledge of the operation of the plant is obtained from 
monthly reports and an occasional visit. 

Under these conditions direct costs and total costs cannot 
well be criticized, and the criticism therefore naturally turns 
to the expense account. There is apparently something in 
overhead charges which attracts the criticism of nearly every- 
one, for one hears criticism of these charges from those who 
have little idea of what goes to make up these charges and who 
have not a faint conception of the subject in its bearing on 
total cost. This tendency must be due to the belief that the 
payment of money for overhead expense is expenditure with- 
out adequate return. 

Superficial criticism of the expense accounts by those in 
authority will probably result in decreased efficiency. 

In one large establishment with which I am familiar the 
shop-expense accounts are kept down to the lowest point with- 
out regard to the efficiency of the tools in the shops. I was 
shown the care taken to keep these expenses down and was 



SUPERVISION OF EXPENSE ACCOUNTS 9 1 

told how the expense had been cut in half and that it was 
believed that the concern had a lower shop expense than its 
competitors. The shops surely showed this — there was no 
necessity for seeing the accounts. Machines were in poor 
condition; belts were as bad as they could be; the small tool 
equipment was atrocious. Moreover, the foreman on every 
opportunity charged shop repairs to the direct cost of some 
big job in the shop, rather than charge to the expense num- 
ber. There is not the slightest doubt that the blind effort of 
someone in authority to reduce shop expense is resulting in 
large losses to this concern. 

When a concern begins to lose money and the order is 
given to economize in the hope of changing losses to profits, 
it is almost invariably true that reductions will immediately 
be made in the overhead expense, notwithstanding the fact 
that the remedy required may be more and better supervision 
and consequently higher overhead. 

When the expense account is cut, the majority, including 
some managers, feel that the cut is just so much saved. The 
increase in direct costs cannot be seen ; it may be several weeks 
or months before there is an increase, as the momentum of 
past conditions cannot be dissipated immediately. There is 
little doubt that the effort made to economize by cutting the 
overhead expense has carried many establishments to ruin. 

Unfortunately, overhead expense is generally known as a 
percentage of the direct labor charges, and the more the effi- 
cient manager reduces his direct labor costs, the higher his 
overhead expenses appear to be. 

There are given below several examples of shops which 
have come directly under my observation in which the subject 
of shop expense required intelligent consideration. In each 
case the increase, either real or apparent, of the shop expense 
meant increase in efficiency while the decrease resulted in a re- 
duction in efficiency. 



0)2 COST KEEPING AND SCIENTIFIC MANAGEMENT 

THE SHOP WITH MACHINERY IN POOR CONDITION AND WITH 
A POOR EQUIPMENT OF HAND TOOLS. 

An experienced manager who knows his business well knows 
that if he is to get work done at low cost, he must supply 
adequate tools with which his men are to work. One can in 
practically all cases judge of the efficiency of a shop by an 
inspection of the machinery and the tool-room equipment. A 
well-equipped shop is not always an efficient shop, but it is cer- 
tain that a poorly-equipped shop with machines and hand tools 
in bad condition is never an efficient shop. The higher the 
wages, the more important it is to provide an excellent tool 
equipment. 

A short time ago an important shop, located in a district 
where wages are very high, came under my observation and I 
found the tool equipment in atrocious condition. The costs 
were excessive and it was surprising that these conditions 
should have existed so long without correction. If low shop 
expense percentage is the aim, it is easily accomplished by not 
spending money to bring the tool equipment up to a proper 
standard. Not only is the actual expense kept low, but the 
expense percentage shows very low, as the direct labor cost to 
which the expense cost is applied to obtain the percentage is 
very high. 

THE SHOP IN WHICH HIGH-PRICED MECHANICS ARE EMPLOYED 
ON WORK THAT SHOULD BE DONE BY BOYS AND HELPERS. 

A great many Government shops fall in this class, though 
the Government has no monopoly in this line. I recently had 
occasion to investigate a boiler shop and found everywhere 
first-class boilermakers doing work that should be done by 
boys and helpers. Boilermakers were cutting off tubes, filing 
the burs after the tubes were cut, polishing the ends of the 
tubes, placing the tubes in position, attending the motors driv- 
ing the expanders and other work of this character. A com- 
petent manager knows the work that should be done by boys 
and helpers. He is in touch with the best industrial practice. 



SUPERVISION OF EXPENSE ACCOUNTS 93 

He knows what the other fellow is doing. Such a manager 
will replace his $4 a day boilermakers with $2 helpers and $1 
boys wherever possible. He will reduce costs. But what is 
the result with his shop expense? For every dollar that he 
reduces his direct cost, his percentage of shop expense goes up. 
If it were possible for him to replace all of his $4 boiler- 
makers by $2 helpers without reducing the output, he has re- 
duced his direct costs by half and doubled the shop-expense 
percentage. 

If the aim is to reduce the shop-expense percentage, this 
can readily be done. No effort is required by the manager; 
all that is required is for him to do nothing — the percentage 
will go down of its own accord. The foreman had rather 
have mechanics than helpers ; they require less supervision ; 
they give him less trouble. Besides, he has no desire to get 
into trouble with the unions, and the members of the unions are 
his best friends. He, therefore, employs mechanics wherever 
possible rather than boys and helpers wherever possible. The 
result is a large labor roll and a small percentage of shop 
expense. 

THE SHOP IN WHICH WORK IS DONE BY HAND INSTEAD OF 
WITH MACHINES. 

The boiler shop previously referred to is an excellent exam- 
ple of this class. Tubes were cut out by boilermakers with 
sledges and hand chisels. Tubes were expanded in some 
cases by hand-operated expanders. Boilermakers with hand 
files removed the burs on the tubes made by the cutting-ofT 
saw. All of these hand operations were replaced by machine 
operations and the direct labor cost greatly reduced, the total 
cost was reduced, the labor roll was reduced, but the actual 
shop expense was slightly increased, and the shop-expense 
percentage was largely increased. 

If the manager can replace every hand operation by ma- 
chines, that is, use altogether automatic machinery, he will 
no doubt enormously reduce his direct cost and total cost, but 
he will greatly increase the shop expense and the shop-expense 



94 COST KEEPING AND SCIENTIFIC MANAGEMENT 

percentage will reach infinity. Surely no one will criticize 
such a manager for high shop expense, yet to-day one hears 
criticism as senseless as this. 

THE SHOP IN WHICH THE OUTPUT IS LOW AND THERE IS 
MUCH LOAFING. 

If a manager takes over a shop in which the output is low, 
where the men are not doing a full day's work, and succeeds in 
bettering conditions and increasing the output per man, he 
will for the same amount of work reduce his labor roll, but 
at the same time increase his shop-expense percentage. Surely 
such a manager is not to be criticized. It will be just as sensi- 
ble to commend the manager who acquires a well-run shop and 
allows his men to loaf to make a larger labor roll in order that 
he can show a reduction in his shop expense. 

OTHER METHODS OF REDUCING SHOP EXPENSE. 

There are other methods than those previously indicated by 
which the shop expense may be reduced without any increase 
in efficiency, or which may result in a decrease in efficiency. 
In many shops, for example a foundry, there is much miscel- 
laneous labor employed on many different jobs. This labor 
cannot equitably be charged direct, and is distributed to the 
jobs either on a tonnage or direct labor basis, as an indirect 
charge. Those who wish to make a good showing with the 
indirect charges frequently arbitrarily charge this labor direct 
to jobs with the result that a few large jobs bear this expense 
while the small jobs get none of it. 

So eager are some to make a good showing with the expense 
accounts that frequently men employed as leading-men, or 
strictly in a supervisory capacity, though not known as fore- 
men or assistant foremen, are charged direct to the jobs in- 
stead of being properly, charged to the supervisory number. 
The only result of charges of this kind is to make the costs less 
accurate, and fool someone in authority into believing that 
he has through good management obtained low expense ac- 
counts. 



SUPERVISION OF EXPENSE ACCOUNTS 95 

COMPARISON OF OVERHEAD EXPENSE PERCENTAGES OF DIFFER- 
ENT ESTABLISHMENTS MEANS NOTHING. 

Even though establishments of the same general character 
have the same cost-keeping system, which is far from being 
the case, a comparison of the expense accounts is of little 
value, and a comparison of the expense percentages is a waste 
of time. 

Before there can be a comparison of any value of expense 
accounts, the detail methods of charging must be standard, 
the methods of management must be standard, the facilities 
must be very much the same, and the working conditions the 
same. 

An establishment having the highest expense charges may 
easily be the most efficient, while the one with the lowest may 
be the most inefficient. The overhead charges are in no sense 
a measure of the efficiency of a plant; the measure of effi- 
ciency is total cost, and not a part of the total cost. 

HOW CAN PROPER CONTROL OF THE EXPENSE ACCOUNTS BE 

SECURED ? 

The analysis, study and control of the expense account is 
a most interesting field to the manager of experience who 
knows his job. It is Greek to one who does not. If you have 
enough confidence in a manager to place him in charge of 
your establishment, let him control the expense accounts ; do 
not tell him to reduce expenses by cutting the expense ac- 
counts; if the product is costing too much, it may be that the 
cost may be reduced by increasing the overhead ; hold him re- 
sponsible for total costs and not a portion of the total costs. 

The cost-keeping system should, however, be such that an 
inspection will readily show where the overhead charges have 
gone. Each month there should be prepared for the manager 
a complete analysis of the expense accounts. These can best 
be shown month by month in parallel columns. 

Fig. 9 gives the analysis of the shop expense. -Each shop 
has a separate expense account, subdivided as necessary, and 



9 6 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



there should be an analysis sheet for each shop. With this 
sheet before him for each shop a manager can tell exactly 
where the money is going. He can see at once any abnormal 



Manufacturing Department. Shop Expense Report. 
Machine Shop — "SM" 


Account. 




July. 


August. 


Symbol. 


Labor. 


Material. 


Labor. 


Material. 


Supervisory and office force 


SMA 




















Miscellaneous labor 


SMB 














Fixtures and furniture 


SMC 






















Dressing and grinding old 


SMD 












Maintenance of small- and 
loose-tool equipment 


SME 




















SMF 


























SMG 






















Pneumatic tools and hose.. 


SMH 
















SMI 























Power transmission 


SMJ 
















Cranes, hoists and elevators 


SMK 





















SML 














Repairs to machine tools... 


SMM 




















SMN 





















SMO 
















Power, heat and light 


SMP 





















SMR 




















General stores and supplies 


SMS 














Operation of tool room.... 


SMT 
















Part plant development.... 


SMX 



















Repairs and maintenance of 


SMZ 

























Fig. 9. Form for Analyses of the Shop Expense. 

expenditures and find out the cause. He should have each 
charge investigated until he has obtained a working minim in 11 
and thereafter he will only have to deal with the exceptions. 

Fig. 10 shows the analysis month by month of the general 
expense. This analysis should be studied and treated as de- 
scribed for the shop expense. 



SUPERVISION OF EXPENSE ACCOUNTS 



97 



Manufacturing Department. General Expense Report. 

"G" 


Account. 


Symbol. 


July. 


August. 


Labor. 


Material. 


Labor. 


Material. 


Salaries of General Officers 


GA 











Office Salaries 


GB 










Cleaning and Care of Yard 
Outside of Shops 


GC 










Drawing Office 


GD 












Experiments 


GE 












Fixed Charges 


GF 













Repairs and Maintenance of 
Floating Property 


GG 
GH 








Hauling, Handling Stores, 
and Shipping 










Stable Expense 


GI 










Legal Expense 


GJ 










Dues and Assessments.... 


GK 
GL 












Leave and Holidays 






Patents 


GM 










Telephone and Telegraph.. 


GN 










General Office Fixtures and 
Furniture 


GO 













Plant Repairs Outside Shops 


GP 








Office Supplies and Postage 


GS 










Travelling Expenses 


GT 













GU 








Miscellaneous 


GV 










Watchmen 


GW 










Part Plant Development... 


GX 













GY 








Repairs and Maintenance of 
Buildings 


GZ 











Fig. io. Form for Analyses of the General Expense. 



































• «41 












































X O 










o c 


































0) 




6 


_• 


_,J 




































i sr 




ca 




u 




































- *j 




Q 




<U 




































g § 




































s 


~ 


"3 


c 
































a s 




1- 


2 


B 


p 
o 






































o 






S 


































■§ 2 




> 






< 










1 
























3 -- 




.'£ 


























1 


1 


i 








-§"§ 




~ 








































ca « 


</5 
H 


H 






o 














| 










| 












■I 

C -B 
O «> 

x o 

a> ca 


Z 


bt 


o 


<u 


































D 
O 

u 


V 


CO 


-5 


c 

3 


































< 


< 






C 

E 
































o S 


w 








< 






























M 3 


z 










1 






1 












| 










[« £ ft 


w 

Ph 

X 








feel 

Oh ° 


1 




























z; m o 


w 




"« 


** 






























5 »- c 






•— 


<u 




1 




























O v o 


fa 




































U T3 i_ 


o 






-3 


































U C o 


>< 


£ 


C3 


§ 1 

o 1 
































^ "is 


< 


a 






E | 
































a 

D 
CO 


o 
on 






< 1 
































72 g t* 

2^2 




. 










1 


1 


1 












1 













£3 

C3 
1-1 


d) 
































W — 0) 

m ca bo 
H o ca 






-5 

B 


B 
















1 
























o 

S 


































fe « "S 










































O £; <u 










< 


































J3 














| 


| 


1 


| 




| 




i 


| 




1 










. -i-! 
































< 2 ^ 










o s 






























^< - o 






"J3 


u 


u 






























§ tn w 









■3 






























fisi! 


c 








1 






1 
























1 


c 


D 
C 






1 


1 


























^0 B 




— ' 






< 








1 






















1 
























1 


| 


1 


i 




1 


1 




^ u .2 M 




B 

c 




ti 












1 

1 






















S ^ ° 


H 
Z 
K 

H 


H 




B 


































c^ o ca a. 


c 

3 


































O P a> o> 
« o -S3 




o 




C 
g 

< 


































> cu — 




































=S 






















1 


















' a rt u 


< 








































C* 








o 


































a 








o 
































M •" (D *« 


P 

a 

z 

5 








5 


































11 It c 

r CU £ C 










































3 








Xi 


'J 


<r 


PC 


- 


C 


ft 


fr 


_, 


g 


- 


£ 


2 


Fv 


£ 


H £ 


Z c c 
>> ca c 


< 








£ 


cr 


cr 


X 


'J 


X 


co 


'Si 


x 


cr 


X 


X 


cr 


& 


w CO 


D 
Z 

< 

«3 








CO 
































ca B 

*-. o . 

Ill 






























! 




























































































































&j= 8 






















































E g^ 










c 






c 


i 


























1 


















a 






JC 






































BBS 










o 

< 


« 




f 
a 
a 

£ 


- 
c 

a 


£ 




P 

.£ 
t/- 

• u 


X 
6 
u 







i 


la 
1 


1 


P 
C 

t/- 
B 
C 


P 
c 

i 


c 

• 1 

c 


i. 

P 

i 

DC 


% 






















id 

B 


a 
a. 




1 

D 
P 


E 
- P 


t 

i 

w 




** j -.j 

c c 


■ X 


! — 


a 

1 « 




£ 


a 




"2 -= 
c o 
o ca 
a o 












U 




I 


3 

u 


C 
'- 


Lo 


111 


R 


la 


£ 


a 




IS 

co 





98 



SUPERVISION OF EXPENSE ACCOUNTS ()) 

A similar comparative report should be made each month 
for the power-house expense, storehouse expense, selling ex- 
pense, and the drawing-office expense. 

Fig. ii is a summary of all the expense accounts, showing 
the expenditures this month, last month, and the average of 
the year to date. It also shows the direct labor charges in 
each shop and the percentage of each class of overhead to the 
direct labor charged. 

With this information a manager should be able to abso- 
lutely control the expense accounts. 



CHAPTER VIII 
Methods Followed in the Payment of Labor 

As the methods for the payment of labor are generally known 
and the advantages and disadvantages of the various systems 
are fairly well understood, but brief reference will be made 
to this subject. 

Day Work: — Payment in accordance with the number of 
hours worked is the method most generally employed and is 
the most unsatisfactory. Under this system there is little 
incentive for a workman to exert himself, and consequently 
the output is very low. It is not uncommon for a man work- 
ing by the day to double or treble his output when put on 
piece work. There is little doubt, however, that day work 
as it is usually found can be greatly improved. In piece work, 
premium work, bonus work, etc., the output of each man is 
carefully recorded each day, and the management knows the 
relative efficiency of the men. In day work it is the rare ex- 
ception to find records of the output of each man, and the 
real efficiency of the man is unknown; the management's in- 
formation on this important subject is based on the general 
knowledge of the foreman that a workman is a " good man " 
or a " poor man." It is surprising that when knowledge takes 
the place of guess-work — when the efficiency of a man is 
based on the quantity of work of standard quality as measured 
day by day — to find that a number of " good men " become 
" poor men," and a number of " poor men " become " good 
men." Correct records made each day of the amount of 
work accomplished by each man, with increased pay for the 
deserving and reductions and discharge for the poorer men 
will make a wonderful improvement in the ordinary day-work 
shop. If such records are kept and the pay of the men is 
graded in accordance with the output and no other change is 

ioo 



METHODS FOLLOWED IN THE PAYMENT OF LABOR IOI 

made in the shop the output in the usual run of day-work 
shops will be increased not less than 25 per cent. In a sub- 
sequent chapter will be recorded the improvement that has 
actually been obtained by keeping records of the output of 
each man. 

The day-work system at best is not satisfactory; to obtain 
the best results each workman must have an incentive to put 
forth his best efforts, and if he does put forth his best efforts 
his reward must be liberal and immediate. Workmen as a 
rule do not look far in the future; a possible distant reward 
will seldom bring forth extra exertions from the average 
workman; to secure the best results the. reward should be im- 
mediate; if a workman puts forth extra efforts and accom- 
plishes more than the usual amount of work he should know 
the next morning the amount of the reward he is to receive 
for his extra efforts. This is the only way in which the maxi- 
mum output can be obtained from the average workman, and 
under the day-work system at its best this is impossible. 

Contract System: — The contract system consists of assign- 
ing definite jobs of work to a competent workman at a stipu- 
lated price and allowing him to employ his own workmen, 
and follow his own methods, and giving him the use of the 
plant equipment necessary for the work. 

In one of the large shipyards .this system is extensively em- 
ployed and appears to give excellent results — at least, excel- 
lent when compared with results previously obtained under 
the day-work system. 

The contractors in this yard are generally men who were 
formerly employed as assistant foremen and leading men. 
The management and the contractor agree on a price for a 
given job of work ; the company employs the men and pays 
them day wages, and by mutual agreement, they are assigned 
to work with the contractor. When the job is finished the 
amount that has been paid out by the company on the contract 
is deducted from the agreed price and the balance paid to the 
contractor, who distributes the profits to himself and to the 
various workers. The company sees that every worker is 



102 COST KEEPING AND SCIENTIFIC MANAGEMENT 

paid the prevailing day wages, but the distribution of the 
profits is left to the contractor. The company keeps books 
for the contractor and knows the cost of the job, and thus 
knows whether the contract price is high or low. The con- 
tractor knows the abilities of the small number of men em- 
ployed and he knows the work that each accomplishes, and if 
a just distribution is made of a portion of the profits to the 
workmen as a bonus, the incentive is provided and a large out- 
put can be obtained from the workers. 

Some of the results obtained in this establishment can truly 
be called astonishing if the inefficiency of day labor and also 
the inefficiency of the usual supervisory force were not known 
and considered. In several cases assistant foremen, as con- 
tractors, retained supervision of work which had been under 
their charge under the day-work system ; the same men were 
employed, and the shop conditions remained the same, yet 
the contract price was about half the previous cost to the com- 
pany, and still the contractor earned substantial profits after 
paying a good bonus to the workmen. 

If any manager has any lingering doubt regarding the de- 
sirability of paying a bonus to foremen and assistent foremen, 
as well as to workmen, these doubts should be dispelled by an 
investigation of the contract system at this establishment. 
This contract system is. in effect, a bonus system, and not only 
do the deserving workmen receive a bonus, but the men in 
charge of the work also receive a substantial reward. This 
svstem has changed mediocre or inefficient gang bosses into 
an efficient supervisor}- force. 

In some cases the contract price is low and no profit is 
made. In these cases the management considers each case on 
its merits. If it appears that the fault is due to the price 
being too low rather than poor management on the part of 
the contractor, the loss is not charged to the contractor. If 
it is believed that the loss is due to poor management, and 
particularly if the records show that the contractor has made 
substantial profits on previous contracts, the loss is charged 
against him. 



METHODS FOLLOWED IN THE PAYMENT OF LABOR IO3 

The contract system is an improvement on the day-work 
system, but it is open to objections. The contractor and his 
men may abuse tools and plant equipment in their efforts to 
obtain large output, and there is an opportunity for work to be 
done on the contract job by men not employed under the con- 
tractor. There is the tendency on the part of the contractor 
to soldier on some jobs, for example, if the contract price is 
high, the contractor knows that if his profits are too large the 
price of the next job will be cut; he knows within very close 
limits the profit that the company will allow him to make with- 
out cutting the price, and in these cases he will soldier on the 
job sufficiently to prevent the price being cut. The case is 
similar in every respect, and the motives are the same, as 
those of a piece-worker who soldiers to prevent the employer 
from learning how quickly the work can be done, and the 
soldiering in both cases is to prevent cutting the price. 

There is no accurate knowledge on the part of either the 
contractor or of the management as to what the job should 
cost. There are, no doubt, on some jobs previous costs, but 
these in many cases are far from what the job should cost. 
Both the contractor and the management having no accurate 
knowledge of the money value of the job, there must ensue 
the inevitable bargaining in which each attempts to deceive 
the other, before the contract price is fixed. 

Aside from the objections noted, the contract system, as 
described, appears to be a drifting system, even though it 
drifts in the right direction. The management, confessing 
that it does not know how much a worker should accomplish, 
confessing that it is not willing to take the necessary steps to 
find out how much a man should do, confessing that it is un- 
able to devise a scheme of management and a scheme for the 
payment of labor which will bring forth the very best from 
every workman, turns over its burden and its responsibilities 
to one of its subordinate assistant foremen to work out in a 
small way the problem which the management confesses that it 
is not able to work out in a large way. 

The Premium System: — The premium plan of paying for 



104 COST KEEPING AND SCIENTIFIC MANAGEMENT 

labor was devised by Mr. F. A. Halsey, and is in successful 
operation in a large number of important plants both in this 
country and abroad. It is described by Mr. Halsey in a paper 
read before the Society of Mechanical Engineers, from which 
the following is a quotation : 

" The plan assumes two slightly different forms, according 
to the nature of the work; one form being suited to work pro- 
duced in such quantities as to be reducible to a strictly manu- 
facturing basis, and the other form to the more limited produc- 
tion of average practice. In both forms the essential principle 
is the same, as follows: The time required to do a given 
piece of work is determined from previous experience, and 
the workman, in addition to his usual daily wages, is offered 
a premium for every hour by which he reduces that time on 
future work, the amount of the premium being less than his 
rate of wages. Making the hourly premium less than the 
hourly wages is the foundation stone on which rest all the 
merits of the system, since by it, if an hour is saved on a 
given product the cost of the work is less and the earnings 
of the workman are greater than if the hour is not saved, the 
workman being in effect paid for saving time. Assume a 
case in detail: Under the old plan a piece of work requires 
ten hours for its production, and the wages paid is thirty 
cents per hour. Under the new plan a premium of ten cents 
is offered the workman for each hour which he saves over 
the ten previously required. If the time be reduced succes- 
sively to five hours the results will be as shown on page 105. 

" This table illustrates the manner in which the cost of the 
work diminishes and the workman's earnings increase to- 
gether until, to cite the extreme case of the last line, if the out- 
put be doubled, the wages paid per piece will be reduced 
33 I_ 3 P er cent., but the workman's earnings per hour will be 
increased 33 1-3 per cent. Were the premium less than ten 
cents per hour, the reduction in cost for each hour saved 
would be greater, and the workman's earnings less. On the 
other hand, the workman would have a smaller incentive, and 
the time would not be reduced so much. The output would 



METHODS FOLLOWED IN THE PAYMENT OF LABOR 



I05 



be less, and the net result might be worse for both employer 
and employee. This raises the inevitable question : What 
should be the rate of the premium? Nothing but good sense 
and judgment can decide in any case. In certain classes of 
work an increase of production is accompanied with a propor- 
tionate increase of muscular exertion, and if the work is al- 
ready laborious a liberal premium will be required to produce 
results. In other classes of work increased production re- 
quires only increased attention to speeds and feeds with an in- 



Column 
No. 1 


Column 
No. 2 


Column 
No. 3 


Column 
No. 4 


Column 
No. 5 


Time 
Consumed 


Wages 
per Piece 


Premium 


Total Cost 
of Work = 
Column 2 -f- 
Column 3. 


Workman's 
Earnings per 
Hour ^ Col. 4 

-f- Column 1. 


Hours 


$ 


$ 


* 


$ 


10 

9 
8 

7 
6 

5 


3.00 
2.70 
2.40 
2.IO 
I.80 
I.50 


O.OO 
.10 
.20 

.30 
.40 

.50 


3.OO 
2.80 
2.6o 
2.40 
2.20 
2.00 


•30 

•311 

•325 

•343 

.366 

.40 



crease of manual dexterity and an avoidance of lost time. In 
such cases a more moderate premium will suffice. Any at- 
tempt, however, on the part of the employer to be greedy and 
squeeze the lemon too dry will defeat its own object, since if 
a trifling premium be offered, the workman will not consider 
it worth while to exert himself for so small a reward, and 
the expected increase of output will not take place. On the 
other hand, if the premium offered be too high, the employer 
will simply pay more than necessary for his work, though 
less than he has been paying. If the rate of premium is de- 
cided upon judiciously, it may and should be made perma- 
nent. No cutting down of the rate should ever be made un- 
less, indeed, improved processes destroy the significance of 
the first base. Every increase of earnings is necessarily ac- 



I06 COST KEEPING AND SCIENTIFIC MANAGEMENT 

companied by a corresponding decrease of cost, and if the 
premium be such as to give these a satisfactory relation, the 
workman may be assured that there will be no limit set to 
his earnings; that the greater they are the more satisfactory 
they will be to the employer. The importance of this cannot 
be too strongly insisted upon. If the premiums be cut the 
workmen will rightly understand it to mean, as under the 
piece-work plan, that their earnings are not to be permitted to 
pass a certain limit, and that too much exertion is unsafe. 
The very purpose of the plan is to avoid this by so dividing the 
savings between employer and employee as to remove the 
necessity for cutting the rate, and hence enable the workman's 
earnings to be limited only by his own ability and activity. 
The baneful feature of the piece-work plan is thus completely 
obviated, and instead of periodical cuts with their resulting 
ill-feeling, the premiums lead the workman to greater and 
greater effort, resulting in a constant increase of output, de- 
crease of cost, and increase of earnings. 

" The broad-minded employer will not fail to recognize that 
his own gain from the system comes largely from the in- 
creased production from a given plant, since not only does the 
system reduce the wages cost of the piece of work in hand, 
but in so doing it increases the capacity of the plant for other 
work to follow. The advantages from this source are so 
great as to render unnecessary and refined hair-splitting as to 
the rate of the premium. 

" Such is the premium plan, and the writer confidently pre- 
dicts that the more it is studied the more perfect will appear 
its adaptation to the requirements of industrial enterprise and 
human nature. Surely, a system which increases output, de- 
creases cost, and increases workman's earnings simultaneously, 
without friction, and by the silent force of its appeal to even- 
man's desire for a larger income, is worthy of attention. In 
addition to the commanding features noted it has others of 
lesser note. The transition to it from the day's work plan is 
easy and natural. It does not involve a reorganization of the 
system of bookkeeping, but only an addition, and a small one, 



METHODS FOLLOWED IN THE PAYMENT OF LABOR IO7 

to the existing system. No opposition to it, organized or 
otherwise, is possible, since there is simply an offer to gratify 
one of the strongest passions of human nature, and the diffi- 
culty often found in introducing piece work cannot occur with 
this:' 

The premium system is in marked contrast to the Bonus 
System and the Differential Piece Rate System, in that in the 
premium system no attempt is made to determine the time in 
which the work should be done, while with the bonus and the 
differential piece-rate system an exact determination of 
the time required to do the work is the foundation on which 
the success of the application of the system depends. While 
with the premium plan the maximum output will seldom be 
obtained, and the management in a measure .lets the workmen 
make the pace, and allows the workmen to decide the methods 
to be followed, it must not be overlooked that this system can 
be introduced with little difficulty in many shops, where it 
would be impossible to introduce the bonus system or the dif- 
ferential piece-rate system without the assistance of an expert. 
The premium system is a great improvement over day work 
and over the piece-work system as ordinarily employed. No 
elaborate rate-setting department is required, for the standard 
times are the times that have been taken to do work under 
ordinary day work, and on this account the system can be 
put in successful operation in any plant by the management 
without outside assistance. 

The Bonus System: — The bonus system was devised by 
Mr. H. L. Gantt, and has been employed by him in a number 
of plants with great success. In a paper read before the So- 
ciety of Mechanical Engineers Mr. Gantt describes the system 
as follows : 

" Under this system each man has his work assigned him 
in the form of a task to be done by a prescribed method with 
definite appliances and to be'completed within a certain time. 
The task is based on a detailed investigation by a trained ex- 
pert of the best methods of doing the work; and the task set- 
ter, or his assistant, acts as an instructor to teach the work- 



IOS COST KEEPING AND SCIENTIFIC MANAGEMENT 

men to do the work in the manner and time specified. If the 
work is done within the time allowed by the expert, and is up 
to the standard for quality, the workman receives extra com- 
pensation in addition to his day's pay. If it is not done in 
the time set, or is not up to the standard for quality, the 
workman receives his day's pay only. 

"... A task must always be set for performing a 
definite operation in a specific manner, a minimum time being 
set for its accomplishment. As compensation, the workman 
is paid for the time set plus a percentage (usually 20 to 50) 
of that time, provided the work is done in the time allowed or 
less. If the time taken is more than the time allowed, the 
workman gets his day's pay only. The fact that in setting 
the task the manner of performing the operation is specified 
enables us to set another task for the same operation if we 
develop a better or quicker method. 

"If after having performed his task a workman wishes to 
suggest a quicker or better method for doing the same work, 
he is given an opportunity if possible to demonstrate his 
method. If the suggested method really proves to be quicker 
or better, it is adopted as the standard, and the workman is 
given a suitable reward. No workman, however, is allowed to 
make suggestions until he has first done the work in the man- 
ner and time specified. 

". . . As used by the writer, the Task and Bonus Sys- 
tem of pay is really a combination of the best features of 
both day and piece work. The workman is assured his day 
rate while being taught to perform his task, and as the bonus 
for its accomplishment is a percentage of the time allowed, 
the compensation when the task has been performed is a fixed 
quantity, and is thus really the equivalent of a piece rate. Our 
method of payment then is piece work for the skilled, and 
day work for the unskilled, it being remembered that if there 
is only work enough for a few, it will always be given to the 
skilled. This acts as a powerful stimulus to the unskilled, and 
all who have any ambition try to get into the bonus class. 
This cannot be too clearlv borne in mind, for we have here 



METHODS FOLLOWED IN THE PAYMENT OF LABOR IO9 

all the advantages of day work combined with those of piece 
work without the disadvantage of cither, for the day worker 
who has no ambition to become a bonus worker usually of his 
own accord seeks work elsewhere, and our working force soon 
becomes composed of bonus workers, and day workers who are 
trying to become bonus workers." 

The Differential Piece-Rate System: — The differential 
rate system of piece work was devised by Mr. Fred W. Taylor 
and was used with great success by him both at Midvale and 
Bethlehem. It consists briefly in offering two different rates 
for the same job; a high price per piece in case the work is 
finished in the shortest possible time and in perfect condition, 
and a low price, if it takes a longer time to do the job, or if 
there are any imperfections in the work. The high rate 
should be such that the workman can earn more per day than is 
usually paid in similar establishments. This system is di- 
rectly the opposite of the ordinary plan of piece work, in 
which the wages of the workmen are reduced when they in- 
crease their productivity. 

Mr. Taylor in his paper describing the differential rate, 
read before the Society of Mechanical Engineers, says: 

" The first case in which a differential rate was applied fur- 
nished a good illustration of what can be accomplished by it. 

" A standard steel forging, many thousands of which are 
used each year, had for several years been turned at the rate 
of from four to five per day under the ordinary system of 
piece work, 50 cents per piece being the price paid for the 
work. After analyzing the job and determining the shortest 
time required to do each of the elementary operations of which 
it was composed, and then summing up the total, the writer 
became convinced that it was possible to turn ten pieces a day. 
To finish the forgings at this rate, however, the machinists 
were obliged to work at their maximum pace from morning 
to night, and the lathes were run as fast as the tools would al- 
low, and under a heavy feed. 

" It will be appreciated that this was a big day's work, both 
for men and machines, when it is understood that it involved 



IIO COST KEEPING AND SCIENTIFIC MANAGEMENT 

removing, with a single 1 6-inch lathe, having two saddles, an 
average of more than 800 pounds of steel chips in ten hours. 
In place of the 50-cent rate that they had been paid before, 
they were given 35 cents per piece when they turned them at 
the speed of 10 per day, and when they produced less than 10, 
they received only 25 cents per piece. 

" It took considerable trouble to induce the men to turn at 
this high speed, since they did not at first fully appreciate that 
it was the intention of the firm to allow them to earn perma- 
nently at the rate of $3.50 per day. But from the day they 
first turned 10 pieces to the present time, a period of more 
than ten years, the men who understood their work have 
scarcely failed a single day to turn at this rate. Throughout 
that time, until the beginning of the recent fall in the scale of 
wages throughout the country, the rate was not cut. 

" During this whole period the competitors of the company 
never succeeded in averaging over half of this production per 
lathe, although they knew and even saw what was being done 
at Midvale. They, however, did not allow their men to earn 
over from $2 to $2.50 per day, and so never even approached 
the maximum output. 

" The following table will show the economy of paying 
high wages under the differential rate in doing the above job : 

COST OF PRODUCTION PER LATHE PER DAY 

ORDINARY SYSTEM OF PIECE DIFFERENTIAL RATE SYSTEM 

WORK 

Man's Wages $2.50 Man's Wages $3.50 

Machine Cost 3.37 Machine Cost 3.37 



Total Cost per Day. . .$5.87 Total Cost per Day. . .$6.87 
5 pieces produced. 10 pieces produced. 
Cost per piece $i-i7 Cost per piece .$0.69 

" The above result was mostly, though not entirely, due to 
the differential rate. The superior system of managing all of 
the small details of the shop counted for considerable. 

" There has never been a strike by men working under dif- 
ferential rates, although these rates have been applied at the 



METHODS FOLLOWED IN THE PAYMENT OF LABOR III 

Midvale Steel Works for the past ten years ; and the steel busi- 
ness has proved during this period the most fruitful field for 
labor organizations and strikes. And this notwithstanding the 
Midvale Company has never prevented its men from joining 
any labor organization. All of the best men in the company 
saw clearly that the success of a labor organization meant the # 
lowering of their wages, in order that the inferior men might 
earn more, and, of course, could not be persuaded to join. 

" I attribute a great part of this success in avoiding strikes 
to the high wages which the best men were able to earn with 
the differential rates, and to the pleasant feeling fostered by 
this system ; but this is by no means the whole cause. It has 
for years been the policy of that company to stimulate the 
personal ambition of every man in their employ, by promoting 
them either in wages or position whenever they deserved it, 
and the opportunity came." 

Fixing Rates and Standard Times: — Both Mr. Taylor and 
Mr. Gantt attach great importance to the scientific rate-fixing 
department. Mr. Gantt's bonus system is based on standard 
times which are set after the best methods have been de- 
termined by experts and standardized. Mr. Taylor's high 
and low rates are determined in the same manner. Both Mr. 
Taylor and Mr. Gantt consider that both systems will fail 
without scientific rate-fixing; indeed, this is the most impor- 
tant element of both of these systems. 

Mr. Taylor in his paper says, " Of the two devices for in- 
creasing the output of a shop, the differential rate and the 
scientific rate-fixing department, the latter is by far the more 
important. The differential rate is invaluable at the start, as 
a means of convincing men that the management is in earnest 
in its intention of paying a premium for hard work; and it at 
all times furnishes the best means of maintaining the top notch 
of production; but when, through its application, the men and 
the management have come to appreciate the mutual benefit 
of harmonious cooperation and respect for each other's rights, 
it ceases to be an absolute necessity. On the other hand, the 
rate-fixing department, for an establishment doing a large 



112 COST KEEPING AND SCIENTIFIC MANAGEMENT 

variety of work, becomes absolutely indispensable. The longer 
it is in operation the more necessary it becomes." 

Mr. Gantt says, regarding task setting, " Inasmuch as, 
after a satisfactory method has been established, a large pro- 
portion of the work of the task setter is the study of the time 
in which operations can be performed, he is popularly known 
as the Time Study man. This term has lead to a misconcep- 
tion of his duties and has caused many honest people to claim 
that they were putting in our methods when they have put a 
stop-watch in the hands of a bright clerk and told him to 
find out how quickly the best men were doing certain work. 
Unquestionably they have in many cases been able to set more 
accurate piece rates by this method than they had been able 
to set by the older methods, but they are still far from our 
ideal, in which the best expert available investigates the work, 
standardizes the appliances and methods and sets a task that 
involves utilizing them to their very best efficiency. While 
the stop-watch is often used to establish a method, it is used to 
determine the time needed to do the work only when the 
standard methods and appliances are used efficiently. Stop- 
watch observations on work done inefficiently or with ill- 
adapted appliances, or by poor methods, is absurd and serves 
only to bring into disrepute all work in which the stop-watch 
is used. Moreover, such use of the stop-watch justly excites 
the contempt and opposition of the workman. 

" To make real and permanent progress, the expert must be 
able to standardize appliances and methods and write up such 
instructions as will enable an intelligent workman to follow 
them. Such standards become permanent, and if the work- 
man is paid a proper bonus for doing the work in the manner 
and time set, he not only helps maintain the standards, but soon 
begins to exert his influence to help the progress of standardi- 
zation." 

There is another important result which comes from the 
establishment of a scientific rate department. The work of 
this department brings out in a prominent manner the necessity 
for carefully systematizing all the details of the management 



METHODS FOLLOWED IN THE PAYMENT OF LABOR II3 

of the shop. Unless this is done the rate department can 
make no progress; a rate is fixed based on the best quality 
of high speed tools, the machine in excellent order, and the 
belt in proper condition, while the work may be done with 
poor tools on a machine out of adjustment. Under these 
conditions a rate-making department is worse than useless, yet 
these are conditions which will be found in the average job- 
bing shop. With a rate department, such important details 
as proper care of machines, care of belting, proper shape of 
cutting tools, grinding and issue of tools, care of appliances, 
etc., must be carefully studied and standarized. 

Referring to this subject Mr. Gantt says, "The fact, so 
repeatedly emphasized by Mr. Taylor, that tasks should be 
set only as the result of a scientific investigation, has proven 
of an educational value hardly to be over-estimated, for the 
scientific investigation of a process that has been developed 
without the assistance of science almost always reveals in- 
consistencies which it is possible to eliminate, thus perfecting 
the process and at the same time reducing its cost. It is this 
scientific investigation that points to improvement in methods 
and educates owners and managers. . . ." 

Mr. Taylor speaks even more strongly, saying, " In many 
cases the greatest good resulting from the application of these 
systems is the indirect gain which comes from the enforced 
standardization of all details and conditions, large and small, 
surrounding the work. All of the ordinary systems can be, 
and are almost always applied without adopting and maintain- 
ing thorough shop standards. But the task idea cannot be 
carried out without them." 



CHAPTER IX 
Management 

A treatise on cost keeping can not be complete without con- 
sideration of the fundamental principles of management. Not 
many years ago it was considered that defects in management 
should be located by an analysis of costs and a study of the 
various elements of total cost. Much can be accomplished 
in this way, as pointed out in preceding chapters, but it 
should not be overlooked that this is not the best method to 
follow; this is not scientific treatment of an important problem 
which can best be solved by scientific methods. With a good 
system an analysis of the cost figures will indicate defects 
in management, and will show the waste of both labor and 
material. These defects can be remedied, and the wastes 
avoided in future work, but the losses already incurred cannot 
be recalled. If every defect shown by an analysis of costs be 
corrected — and in many cases this will involve radical 
changes in organization and methods — the establishment will 
eventually reach a high state of efficiency, but this will require 
time, and many managers now realize that at best this is but 
a drifting method. 

The problem should be approached in a scientific manner; 
the root of the evil should be attacked ; the organization and 
methods should be studied and analyzed, the defects discov- 
ered and remedied; there should be proper planning of all 
work, followed by effective foremanship to see that the work 
is executed as planned. 

It must not be assumed that accurate cost keeping and de- 
tailed analysis of costs plays no part in this system ; it is an 
essential part of the system; it is even more effective than 
when defects in organization and methods of management 
have not first been corrected, for the analysis will now defi- 

ii4 



MANAGEMENT I I 5 

nitely place the blame for excessive production costs. An 
accurate cost system is an integral part of the scheme of or- 
ganization and it performs its function just as every other part 
of the system or every individual in the organization performs 
its or his function. 

During recent years shop management has received a great 
deal of attention from competent engineers and managers. 
The correct type of management has been widely discussed 
and much has been written on the subject. 

On one hand, competent engineers who have studied the 
subject for years recommend a system of management which 
largely increases the number of non-producers and increases 
the cost of management. These engineers claim that the in- 
creased returns will pay many times over for the increased 
cost of management. They point to the successful establish- 
ments which are using this type of management; they give 
numerous examples where costs have been enormously re- 
duced and at the same time wages have been increased ; they 
claim that the system which they advocate will settle many 
of the differences between capital and labor, and that under 
this system there will be cordial cooperation between em- 
ployers and employees. The advocates of this system claim 
that the general principles of this type of management are 
applicable to all forms of industrial work, and point to the 
remarkable results which have been obtained where these prin- 
ciples have been observed, not only in machine shops, but also 
to miscellaneous work done by common labor, such as handling 
pig iron, shoveling coal, excavation work, etc. They also 
show that similar results have been obtained in the textile 
mills, in the bleacheries, in bricklaying, in the erection of build- 
ings, and also in general contracting work. 

Mr. Fred W. Taylor, of Philadelphia, is the originator of 
this type of management, and he has for years labored in- 
cessantly for progress in management. Mr. Taylor believes 
that management is an art, in that it is the systematic applica- 
tion of knowledge and skill in effecting a desired result. In 
his essay on " Shop Management," he states, " Management 



Il6 COST KEEPING AND SCIENTIFIC MANAGEMENT 

is destined to become more of an art, and many of the ele- 
ments which are now believed to be outside the field of exact 
knowledge will soon be standarized, tabulated, accepted and 
used, as are now the many elements of engineering. Manage- 
ment will be studied as an art and will rest upon well-recog- 
nized, clearly-defined and fixed principles instead of depending 
upon more or less hazy ideas received from a limited observa- 
tion of the few organizations with which the individual may 
have come in contact." As science is systematized knowl- 
edge, Mr. Taylor's type of management is justly called " Scien- 
tific Management," and this term is now not only accepted 
by the engineering profession, but also by the world at large, 
as descriptive of the principles of management advocated by 
Mr. Taylor and his associates. 

On the other hand, some managers of large successful es- 
tablishments take issue with Mr. Taylor and assert that the 
detail methods advocated are not necessary; they claim that 
the detail planning of all work takes all initiative from the 
workmen and will in time make them mere machines. Un- 
fortunately many men in the shop who do not understand the 
principles of scientific management or the detail methods re- 
quired to apply these principles, believe all of the criticism 
they hear and read of these methods and are ready to oppose 
any changes which they think lead towards " Taylor Meth- 
ods." While the number of managers and engineers who 
oppose scientific management will each year grow smaller and 
the opposition will in time disappear, it seems desirable to 
consider the reasons for this opposition. 

Is scientific management the use of a lot of reports, blank 
forms, and red-tape methods, employing an army of non-pro- 
ducers, who increase the overhead expense and produce no 
adequate return? If so, it is a fraud parading under an at- 
tractive name. Or, is it a scientific treatment of an important 
industrial problem? 

There are some who appear to believe that scientific man- 
agement is nothing but red-tape methods with an army of 
clerks and other non-producers principally employed in making 



MANAGEMENT 11/ 

written reports and filling many blank forms. These can see 
no results, in increased profits, from this type of manage- 
ment. They see only the means for accomplishing an end; 
they see the machinery and not the finished product ; the ma- 
chinery looks complicated and they mistake it for the product. 
The machinery is only incidental ; it is not scientific man- 
agement, it is only the means for securing scientific manage- 
ment. 

There are managers of the old school who believe in the 
" good, old-fashioned way." These know nothing of scien- 
tific methods and they have little patience with those who 
advocate changes. Why do these managers tolerate a drafting 
room or a designing staff? Why not return to the good, 
old-fashioned rule-of -thumb methods and the drafting work 
done by the superintendent and foreman on the floor of the 
shop? There is just as much reason for this as for the anti- 
quated shop methods. Just as much money can be saved by 
scientific methods in the shop as has been saved by scientific 
methods in design work. 

Under these conditions it is not remarkable that progress 
is slow. As the aims of those who advocate scientific manage- 
ment are more generally known, much of the opposition will 
disappear. 

If scientific management be properly defined, this definition 
can be applied to the various forms of management in use, 
or that may be proposed, and the bogus and real determined. 
It is nothing more than a strict application of the principles 
of good management. The details must be made to suit the 
requirements of each case. There can be no hard and fast 
rule. Each problem must be carefully studied, and the meth- 
ods made to fit the requirements. 

Mr. Taylor has concisely defined management as " knowing 
exactly what you want men to do and then seeing that they 
do it in the best and cheapest way." 

This definition may be elaborated, as follows : 



Il8 COST KEEPING AND SCIENTIFIC MANAGEMENT 

Scientific Management provides : 

First: — A careful analysis to determine before work is un- 
dertaken, exactly what is to be accomplished. 

Second: — The determination of the best way to accomplish 
the work in the quickest time at the lowest cost. 

Third: — The employment of the best machines, best facili- 
ties, and the best men available to carry out the work in the 
best way, as previously determined. 

Fourth : — Cordial cooperation between employers and em- 
ployees, in order that both may put forth the best efforts 
to secure low production costs. 

Fifth: — An accurate record of the cost of the work in such 
detail that the various elements of cost may be quickly de- 
termined. 

No doubt many managers will exclaim that there is noth- 
ing new in this definition. They consider the principles enun- 
ciated so simple, so elementary, so plain to everyone, that 
they are surprised that anyone should write on this subject. 
They are amused that the high-sounding term " Scientific 
Management " should be applied to what is nothing more than 
good management. They are satisfied that their establish- 
ments have been managed for years in accordance with these 
principles. 

These are correct, that Scientific Management is nothing 
more than good management, but are they correct that this 
is the system of management generally followed? There is 
little doubt that in the majority of shipyards, machine shops, 
foundries, etc., throughout the country the requirements of 
scientific management as defined above are not obtained, yet 
owners and managers do not realize this. Before defects can 
be corrected they must be known: before an owner or manager 
asserts that the system of management which he employs se- 
cures the results obtained by scientific management he should 
make a careful investigation of his own plant and analyze his 
methods, or, better still, have someone in whom he has confi- 
dence make this investigation. 



MANAGEMENT I 19 

Is a careful analysis made of the work to be accomplished 
before the work is undertaken? 

In new work drawings are supplied, and in manufacture 
work these are usually in great detail. Frequently, however, 
the so-called drawings are merely outlines which are given 
to a workman with general instructions. The workman has 
to study out the details and in some cases has to make sketches 
from which he works. Is he best fitted for this work? Is 
it economical to employ him on this class of work? Fre- 
quently the workman encounters a difficulty which he cannot 
overcome. He wastes much time vainly trying to find a 
way out, and is finally forced to go to the foreman for infor- 
mation. The foreman is engaged with other duties and it 
may be some time before he can give the question attention. 
Perhaps the foreman cannot solve the difficulty, and he too 
wastes time trying to do so, and is finally forced to go to the 
drafting room, which should have supplied the information 
in the first place. 

In repair work it is the t exception that a careful analysis is 
made of the work to be accomplished before the job is under- 
taken. The general trouble is, of course, known, but the actual 
work to be accomplished is not determined before the work is 
begun. The general rule is to assign the work, with general 
instructions, to a competent mechanic. The workman then 
begins to tear apart and he himself decides on much of the 
work. Soon, however, he strikes something which he cannot 
decide. He tells the foreman of this and the job is held up 
until a decision is reached. Often the foreman does not care 
to make a decision and he refers the question to the superin- 
tendent. The latter has many such questions to decide and 
many other duties. It may be several days before the work- 
man gets definite instructions. In the meantime the job is 
dragging or is actually held up. When work is carried out 
in this manner, the machine work is done as it develops, cast- 
ings or forgings are ordered when it is found that they are 
needed, and material is not ordered from store until it is 
actually required by the workman. This procedure causes 



120 COST KEEPING AND SCIENTIFIC MANAGEMENT 

delay after delay; the workman attempts to appear busy; if 
the foreman sees that nothing is accomplished while the work- 
man waits for information, machine work, forgings, or ma- 
terial, he may take the workman away from the job until 
the material or information arrives, but it is probable that the 
workman will successfully kill time until he can proceed. 

If a record is kept of the time spent by the workman in 
hunting for information and hunting for tools, and the time 
wasted waiting for machine work, castings, forgings and other 
material, it will be found that this time in many cases actually 
exceeds the time required to do the work. If the large final 
cost of the job attracts the attention of the manager, he can- 
not discover where the money has gone. He knows that the 
cost is far too great and when he takes the foreman to task the 
blame is usually placed on the workman, who may be a com- 
petent, hard-working mechanic. It is not his fault; it is the 
fault of the system under which he works. Superintendents 
and foremen will deny that these faults exist; each will state 
that there are no delays of this kind. These conditions are 
bound to exist; they cannot be avoided under the system of 
shop management usually employed. 

It must be admitted that the work to be done must be ac- 
curately determined by someone. Is it best to have it de- 
termined by the workman as the work progresses? Is it 
profitable to employ a mechanic on work of this character? 
The work to be accomplished must be determined, and the 
logical way — the scientific way — is to have this carefully 
done before the job is started. If it is necessary to entirely 
dismantle a machine to discover what is to be done, do this 
before men are put on the job proper. Tear down the ma- 
chine, have competent men determine exactly what is to be 
done, order material, castings, and forgings and the neces- 
sary machine work, and do not start the job until this is done. 

Are the best methods for accomplishing the work determined 
before the work is undertaken? 

The second requirement of good management naturally fol- 
lows the first; after the work to be done has been determined, 



MANAGEMENT 121 

the best way of doing the work should be determined. There 
are very few shops where any effort is made to determine 
the best means for accomplishing- the work. The mechanic 
who has the job decides in many cases the methods to be fol- 
lowed. Mr. Fred W. Taylor has gone into this fully and 
has clearly shown that it is impossible for the mechanic to 
determine in machine operations the best feed, depth of cut, 
and speed. Mr. Taylor has proved the enormous savings that 
can be effected by having these determined by someone who 
is competent to do this. Little consideration or thought is 
given in many shops to the class of machine to which work 
should go. The work is often assigned to a machine because 
the operator at that machine is nearly out of a job. 

In a shop under my supervision I noticed that frames for 
water-tight doors were faced on a planer. I suggested to 
the foreman that they could be done more quickly on a slab 
milling machine which was idle. He assured me that this 
had been carefully considered. This is the answer you expect 
and it is the one you will nearly always get. The job was 
changed to the slab milling machine and the time was cut in 
half. 

The selection of the proper machine is only one of the 
many important elements of the best way of accomplishing the 
work. As a general rule the shop is run by a foreman and 
a few assistants, the number depending on the size of the 
shop. These assistants are called from job to job as trouble 
develops and often several jobs are waiting for the assistant ; 
nothing is schemed out ahead ; the assistants are worked to 
their limit and only give their attention to jobs which require 
immediate attention; they can do no more. 

Are the men best suited to each class of work employed? 
Is the best use made of machines and facilities? 

The third element of scientific management requires that 
men be employed who are best suited for each class of work, 
and that machines, tools and other shop facilities shall be in 
excellent condition. In almost any jobbing shop, and in many 
large establishments there will be found men employed on 



122 COST KEEPING AND SCIENTIFIC MANAGEMENT 

work which can be done equally as well by boys ; mechanics 
will be found on work which should be done by trained labor- 
ers. In some places these conditions are due to the require- 
ments of labor unions or at least to avoid any trouble with 
the unions. In the majority of cases, however, it is a natural 
result of the system of shop management employed. While 
it is true that an intelligent laborer can be trained in a few 
weeks or in a few months to do certain classes of work usually 
done by mechanics, he must have instruction and assistance. 
If put on the work and left to himself he will not only spoil 
work, but he will be ridiculed by his shopmates and will soon 
become discouraged and give up the job. In shops where the 
ordinary system of management is employed neither the fore- 
man nor his assistants have any time to train workmen; they 
can only give attention to the immediate pressing duties. 
Under these conditions it is impossible to employ laborers on 
this class of work. In the ordinary shop the foreman nearly 
always desires to employ mechanics on this class of work. He 
feels that mechanics will make fewer mistakes and will re- 
quire much less attention than handy men or trained laborers. 
Under the usual conditions foremen cannot be blamed for wish- 
ing to employ skilled men on all work. 

One of the most frequent causes of the excessive cost of 
work is the poor condition of machines and facilities. A 
careful examination will, in many cases, show that machine 
tools are not in the best condition, belts are poor, the supply 
of hand tools is inadequate, and facilities which would greatly 
reduce costs are lacking. 

In a large establishment which I recently visited, I noted 
that drills, reamers, etc., furnished the workmen were not in 
good condition. I questioned one of the men and he told 
me that it was the exception to get a good tool from the tool 
room. In the tool room I found that no inspection was given 
the tools when returned other than that given by the laborer 
who received them. Unless a tool was broken, or the edge 
completely gone, it went back to the racks for re-issue. A 
casual inspection showed the tools in the racks in bad condi- 



MANAGEMENT 1 23 

tion. The tools were issued to high-priced mechanics and 
they were expected to produce results. The men worked at 
" day work " and it did not matter to them. Piece work 
would have opened the eyes of the management to the con- 
dition of the equipment. The assistant foreman in charge 
of the part of the shop in which the tool room was located 
and in charge of the tool room, stated that when the men em- 
ployed on the grinders ran out of a job they went over the 
tools stored in the racks and " touched them up." Can one 
believe these conditions possible? This was found in a large 
establishment which employs several thousand workmen. 

Is there cordial cooperation between employers and em- 
ployees to increase output and reduce production costs? 

The fourth element of good management is cooperation 
between employer and employees. This is the most important 
element of management and it is entirely lacking in the great 
majority of shops. In many shops excellent relations exist be- 
tween the management and the workmen, but this is not co- 
operation. Cooperation has two sides, and many employers 
see but one side ; they believe in the men cooperating with the 
management to obtain low production cost, but they do not 
think that it is any part of the duty of the management to co- 
operate with the men to enable them to earn high wages. 
True cooperation cannot be obtained unless there are mutual 
benefits. If an employer expects his men to assist in securing 
low production costs, he must assist the men in securing high 
wages. Mr. Taylor, in his papers and books attaches the 
greatest importance to this part of the subject; by his system 
and his methods he has been able to bring about true coopera- 
tion between workmen and management and this is because 
each obtains that for which he is striving — the workman 
high wages, and the management low labor cost. 

The fifth element of good management is an accurate rec- 
ord of the cost of the work. This is obtained in very few 
establishments other than strictly manufacturing shops, and in 
many of these accurate costs are not obtained. This element 
has already been considered in some detail. 



124 COST KEEPING AND SCIENTIFIC MANAGEMENT 

To follow the principles of good management is not a 
simple problem. If owners and managers will be honest with 
themselves and carefully examine the operation of their plants 
the great majority will find that the essential requirements of 
scientific management are not met. It must be admitted that 
these requirements are essential ; practically all are willing to 
accept these principles. Then, why not enforce them ? 

When the owner or manager really studies these principles 
as applied to his business he discovers that it is not a simple 
problem to carry them out ; he sees that it will require a com- 
plete reorganization of his staff to do this; he sees that he 
will require expert help to make the changes necessary and 
that it will require a large staff to carry on the work after 
the changes are made. This will cost money — in some cases 
a great deal of money. He is now making a reasonable 
profit; he dislikes changes and this is one which will involve 
calling outside help, actually turning over for the time being 
the control of a large part of the management to an outsider. 
This will cause friction and opposition from many of his 
permanent staff. It requires courage and the strength of his 
convictions to make a change of this kind. If he consults 
with his staff every argument will be used to prevent the 
change. They consider it a reflection on their management; 
they see trouble and perhaps danger ahead for themselves. 

Before making the decision that it is not worth while, the 
manager should make a careful investigation. He is probably 
an able man who has had much shop experience ; he has 
risen on account of his ability. For a number of years, being 
a competent manager, he has not devoted his time to details; 
he has been occupied with the big affairs of management 
and has only been dealing with the exceptions in the shops. 
Let him turn over the management to an assistant as if he 
were going to the mountains for a month; then go into the 
shops instead. Don't let him concern himself with the man- 
agement; don't let him be drawn into it. This will be diffi- 
cult, but for the success of the plan I propose it is necessary. 



MANAGEMENT 125 

He is no longer the manager but is a shop expert making a 
critical examination of his own plant. 

Select a job in progress — preferably a repair job; take 
this work and study it from beginning to end. No doubt the 
foremen and assistants will give the greater part of their at- 
tention to it, but that will make little difference. He will 
find delays, lack of facilities, waits for material, poor methods, 
lack of proper information for carrying on the work, and he 
will see on every side where money can be saved. Take a 
new r job in progress, follow it from the raw material to the 
finished article. Find out when the material was ordered, 
who ordered it and how he obtained the necessary informa- 
tion. Find out how the material was obtained from the store- 
house, when it arrived in the shop and what is the next step. 
Study each of these details, get all of the facts. At each 
step study to see the improvement that can be made. Follow 
this job through the shop — department to department — 
shop to shop — in the same manner. No matter if every 
foreman and assistant are concentrated on the job, he will find 
enough lost money to open his eyes. 

At the same time note what is happening with other jobs 
in the shop while the foremen are concentrated on the par- 
ticular jobs which he is analyzing. Let him examine the ma- 
chine tools and find out in detail how they are kept up. Ex- 
amine closely the condition of the belts and find out who is 
responsible for their condition. Take a machine at random, 
put in some high-speed tool steel and put on a test, using cut, 
feed and speed which he knows should be possible. See if 
the belt will pull it. See if the machine is in condition to 
stand the test. Examine the castings from the foundry to see 
if the patternmaker has provided too much finish. See how 
this finish is removed; see if on brass castings more cuts are 
made than are required. See if unimportant dimensions are 
marked on the drawings. Isn't it a fact that men at machines 
are taking as much care to finish to unimportant dimensions 
as to important dimensions? Examine carefully the small- 



126 COST KEEPING AND SCIENTIFIC MANAGEMENT 

tool equipment ; take out the tools from the racks in the tool 
room and examine their condition. 

If managers will make the examination suggested, I am 
satisfied that before two weeks have passed many will be 
ready to hunt for new foremen. It is not the fault of the 
foreman ; it is the system. Go to the root, don't scratch on 
the surface. The best foreman on earth can not produce the 
best results with the system in use. The system must be 
changed ; scientific, common-sense methods must take the 
place of the haphazard, go-it-blind methods now followed. 



CHAPTER X 
Wasted Time Detected by Time Studies 

If time wasted by employees can be eliminated there will not 
be so much complaint of the high cost of living Mr. H. L. 
Gantt in his book, " Work, Wages and Profits," has shown that 
the inefficiency of labor has an important bearing on the pres- 
ent high cost of living. Wasted time is the principal reason 
for inefficient labor. 

Very few owners or managers realize that an enormous 
amount of time is wasted by men in their employ. They 
know, of course, that some labor is wasted, but there is no 
record of the amount of this, and it is generally assumed that 
this is an unavoidable loss. If an accurate record can be 
made of the actual productive working time of each employee, 
and the total productive time compared with the payroll time, 
the difference will be found to be very large. The losses due 
to this difference will be so great that no manager will be 
content, once he has the information, to consider it an un- 
avoidable loss, but will ascertain the cause, and seek a remedy. 

Wasted time, while due to many causes, may be classed 
under four general heads, viz. : 

Loafing. Under this head there are the wastes due not only 
to men deliberately loafing, but also the losses due to men 
soldiering or nursing their jobs. With many men killing- 
time is almost an art. Very often men are apparently in- 
dustrious, but the amount of work accomplished is small. 

In the average well-conducted factory the losses due to 
men deliberately loafing are comparatively small, but those 
due to men soldiering are large. This is a waste which is 
not easy to detect, and the remedy is difficult. 

127 



128 COST KEEPING AND SCIENTIFIC MANAGEMENT 

Mr. Fred W. Taylor, in one of his papers before the So- 
ciety of Mechanical Engineers, on " Shop Management," 
says, " So universal is soldiering for this purpose (to keep 
employers ignorant of how fast work can be done) that 
hardly a competent workman can be found in a large estab- 
lishment, whether he works by the day or on piece work, 
contract work, or under any of the ordinary systems, who 
does not devote a considerable part of his time to studying 
just how slow he can work and still convince his employer 
that he is going at a good pace." 

Employment on Unsuitable Work. Under this head are losses 
due to the employment of men on work which can be more 
economically performed by others. An example of waste 
due to this cause is a workman making sketches from which 
to work, which is not infrequent in jobbing repair shops. 
Other examples are ; workmen grinding their tools, lacing 
belts for their machines, going to the tool room for tools, 
and repairing break-downs of their machines. Under this 
head should also be included waste due to the workman 
doing much preparatory work before he can undertake the 
actual work which has been assigned to him, such as the 
preparation of the machine and tools for the job, hunting 
information as to exactly what is required, or hunting for 
material. 

The losses under this head in the average shop are us- 
ually large. They are not only due to wasted labor, but 
are also due to wasted machine-tool time. 

Lost Time due to Unnecessary Waits. Under this head are 
losses due to waits on account of lack of information or 
lack of material. There is also a loss, which is much 
larger than is suspected, due to delays in the assignment of 
the next job. 

There is little excuse for the losses under this head, yet 
in the average jobbing shop the waste due to these causes is 
not inconsiderable. 

Poor Equipment. The losses under this head are due to time 
wasted on account of poor arrangement of tools or equip- 



WASTE TIME DETECTED BY TIME STUDIES I29 

ment, inferior equipment, or lack of necessary tools and 
facilities. 

A furnace improperly placed in relation to a steam ham- 
mer will cause unnecessary steps on the part of the men 
which may result in considerable wasted time. 

A grouping of machine tools which requires work to go 
back over the same route several times causes delay and 
wasted time. 

Break-downs of machine tools are frequent sources of loss. 
Poor belting, or lack of attention to belts, not only cause 
stoppages due to breaking of belts, but also large losses due 
to the poor pulling capacity of the belt, which prevents the 
machines working to anywhere near their capacity. 

Time is frequently wasted on account of lack of necessary 
equipment, as an insufficient number of steam hammers will 
cause losses due to smiths waiting for a hammer, and 
further, furnishes an excuse to cover soldiering or loafing. 

The progressive manager must know what is taking place 
in his plant, if he expects to obtain satisfactory results. He 
must know the losses due to loafing; which are the faults of 
the workmen. He must know the loss due to men waiting 
for information, material or jobs; which is due to faults of 
organization. He must know the loss due to poorly ar- 
ranged or imperfect plant equipment or lack of equipment; 
which is a fault of the management. 

Before difficulties can be removed or overcome, a manager 
must first be convinced that they exist. Before he can select 
and apply corrective measures he must know the extent and na- 
ture of each loss. With this information he knows the remedy, 
or if he does not, he is in a position to search until he finds it. 

Many managers fail on account of guesswork. They guess 
at the cause, and guess at the remedy, and failure is inevita- 
ble. A manager may know that the output is small and that 
manufacture costs are high; competitive selling prices will 
usually tell him this much. But unless he knows the cause, 
he must necessarily guess at the remedy. In guessing at the 



I3O COST KEEPING AND SCIENTIFIC MANAGEMENT 

remedy the entire blame is usually placed with the employees, 
either workmen or foremen, or with both; when, in reality, 
the greater part of the blame should be placed with the man- 
agement. 

Under these conditions the first guess for the remedy is 
an attempt to drive the men to greater efforts — to increased 
output. This is doomed to failure ; workmen do not respond 
to drive methods. They know, better than the management, 
that the reason for low output is due in a great measure to 
faults for which they are not responsible ; faults due to poor 
organization, poor equipment or poor management. There 
is no action which a manager can take that will do more harm 
than to blame the workmen as a whole with faults which be- 
long elsewhere. They resist the drive methods ; they become 
dissatisfied and sullen, or even destructive when there is little 
chance of detection. 

The proper procedure is to first find the cause. This can 
only be accomplished by detail observation. The best means 
for doing this is by stop-watch unit time studies. This 
method was first successfully followed by Mr. Fred W. Tay- 
lor, and since then has been used by many others with great 
success, 

Even those who do not accept Mr. Taylor's teachings in 
their entirety, must admit the great advantages to be gained 
from unit time studies. 

A manager should have exact knowledge of the amount of 
time wasted and the cause of the loss. This information 
can be obtained from time studies. There will, of course, 
be less time wasted than is usual, on account of the men doing 
better while - under observation; but notwithstanding this, 
the losses exposed, the defects in organization and equipment 
brought to light, will astonish even the most skeptical man- 
ager. He will immediately see the necessity for improvement. 
He will wonder how it has been possible for him to miss so 
many glaring defects for so long; many of which can be 
easily and quickly corrected. 

Improvement will begin from that date, and new light hav- 



WASTE TIME DETECTED BY TIME STUDIES 1 3 I 

ing dawned, the improvements will continue and increase, un- 
til scientific management in. that plant will become a fact, not 
a theory to discuss when there is nothing else to do. 

The output of the drop forge shop at the Mare Island Navy- 
Yard was not satisfactory. There are no drop forgers on 
the Pacific Coast and the one employed was brought from the 
East. He was a man of many years' experience, and the 
quality of his work was excellent, but the output was far 
below what it should have been. It was not possible to employ 
piece work or the premium system. The usually followed 
method of telling the man that the output must be increased 
was followed, with the usual result — no improvement. The 
man would have thrown up his job and returned East before 
he would increase the output and thereby admit that he had 
been soldiering in the past. This is in accordance with human 
nature, and human nature must be studied if success is to be 
attained. 

An experienced observer was assigned to discover the 
trouble, and also the remedy. Without attempting to change 
any of the conditions he made sjop-watch time studies of 
every minute of the forger's day. The form of the obser- 
vation sheet is shown in Fig. 12 and is self-explanatory. The 
heavy black line in the middle of the vertical columns repre- 
sents graphically the operation of the workman for each ten 
seconds of time. At the end of each day the sum of the 
times in each column is obtained and a chart similar to those 
shown in Fig. 13 is made. This chart shows at a glance the 
actual productive time, and clearly locates the large losses. 

In observation No. 1 of Fig. 13, the productive time is 
small, while the time lost in waiting for heats amounts to 
one-half the day. It is clear that to make any marked im- 
provement in production, steps must be taken to reduce the 
time " waiting for heats." This must be the point of attack. 

The material used is 1*4 -inch by 3 Y> -inches, in sufficient 
length to make four forgings. Three bars were first placed 
in the furnace lying flat. The operator forged three pieces 
from each bar and then the fourth or end of one bar, before 



~ - 






OBZ 


~£/eV/?770A/ c5//£TST . 


«: 






*-'3 ~ /-a'/p 


JS4 


72E1 K-JJf-S ■ / VS*-' 

e/ps- 


' /-arfC/^<S- - 


-- 3£> 






r?*f; Vfec&£y 


S«e*T./V9 _&.. -77™*- -3-30«A? -To J-Q.0JX* _ 


7Tm£^ 










srf/fes 


Mfos— 


\St0cac 
72.#c*ff '" 
7Zf/v#c$, 


A^vwy-fSw-S' 


9.3 O 
To 3 1 








1 






XX 


32 




V 


to 


\.o 










33 














- 






3+ 














- 


X 




<J<5~ 














" 






32 




Ur 


tr 












&7 




lio 




a 










- 


^38 




\>6 


10 








X 




3? 






1 












4-o 








30 


\** 










-+' 














- 






+? 














_ 






-43 




\*s 




3f 






- 






-++ 




\ xo 




•To 








X x 




■4-S- 














"~ 






-*■£> 




















47 














- 






*8 




b' 




#r 






- 






4? 


















ifO 




\sc 


to 












ev 














_ 






*52 




















«TJ 




















W 














— 






*/VT 




















cTZ 


















V7 








ZS 


K 




"!" 


X 




€& 








l*r 


*\ss 








*r? 






\4o 




\*o 








fP.OO 






H 






- 


* 




%TfL~ 


o- o 


^.-/O 


22- 30 


2- OS 


/-/S 


20 


8 







Fig. 12. Form for Observation Sheet for time studies to determine 
defects in methods or equipment. 

132 



WASTE TIME DETECTED BY TIME STUDIES I33 

putting in a new cold bar, and as he drew out the end of 
the others, new bars were placed in the iurnace. By this 
method there is considerable interval of time between the 
forging of the last piece of the first heat and the first piece 
of the second heat ; this time being required for the second 
heat to reach the required temperature. 

When questioned regarding his methods the operator claimed 
that the furnace could not heat faster. The furnace was ex- 
amined and found to be in excellent condition. If the state- 
ments of the operator are correct it will require a larger fur- 
nace to reduce the excessive waiting time. It, however, was 
not believed that the operator's estimate of the heating ca- 
pacity of the furnace was correct. 

Six bars were then placed in the furnace on edge, for the 
working heat. The bars had three pieces forged from each, 
and as each bar was taken from the furnace for the last piece, 
it was replaced by a cold bar. The furnace did its part of the 
work well and no difficulty was experienced in obtaining a 
forging heat quickly. 

By the new method twenty-four pieces were forged from 
each heat instead of twelve, and the interval between heats was 
reduced one-half. 

The results obtained from the second method of operation 
are shown on the chart, Observation No. 2 in Fig. 13, and the 
large increase in production is graphically represented. The 
output was increased from 180 forgings per day to 320. 

No doubt some will claim that it did not require time 
studies to locate a fault that should have been apparent to 
the foreman; some will claim that the superintendent should 
have noticed the trouble and immediately applied the remedy ; 
and that with competent foremen and a superintendent of ex- 
perience time studies are a useless expense. 

In nearly all cases after a trouble has been located, and 
the remedy found, it seems simple. The defect stands out 
conspicuously, the remedy appears self-evident, and surprise 
is expressed that the trouble should have continued for so 
long a time without discovery. 



134 COST KEEPING AND SCIENTIFIC MANAGEMENT 

The example given is selected because the defect was glar- 
ing, because the remedy is simple. 

It does seem strange that foremen, superintendents and 
managers pass over day by day, month after month, faults 
as glaring as the one exposed in the example given. Yet, 
these glaring defects are passed over, and may continue for 
years. 

Any manager who believes that few defects exist in his 
plant is deceiving himself; he is retarding progress and better 
efficiency by these beliefs. Let him try a few stop-watch ob- 
servations and he will discover many faults as striking as the 
one given. 

Time studies bring to the attention of the manager faults 
which he does not believe exist, faults so grave that he does 
not believe it possible for them to exist in his establishment. 
Without these studies these faults may continue undiscovered 
for years. With these investigations, the faults are brought 
to light and the remedy stands out, as bright as the noon-day 
sun. 

While the principal value of time studies is in exposing 
defects in methods, organization and equipment, and pointing 
out the remedy, they are also of value in that they point out 
fundamental conditions under which the work is accomplished, 
and cause study and investigation to be devoted to bettering 
these fundamental conditions. 

In a large blacksmith shop at the Mare Island Navy Yard 
time studies disclosed the usual glaring defects; many of 
which were immediately corrected. They also exposed the 
very large amount of time in which the smiths are not work- 
ing at the hammer or the anvil, but are tending their fires or 
waiting for a heat. Improvement was made by requiring 
better supervision, which produced closer attention on the part 
of the men, but the unavoidable loss was large. 

To produce further appreciable improvement, required 
changes in the fundamental conditions which will reduce the 
time required to take the heats. 

Coal was the fuel used, and I gave careful consideration 



WASTE TIME DETECTED BY TIME STUDIES 



135 




136 COST KEEPING AND SCIENTIFIC MANAGEMENT 

to the subject of improvement in the quality of the fuel. 
After much study, investigation, and many experiments it 
was determined that crude oil can be successfully burned, not 
only in furnaces, but also in open blacksmith forges. The 
first blacksmith shop in the world to use oil exclusively was 
the result, and this was brought about by the use of time 
studies. With this change the time required to take the heats 
was greatly reduced, and owing to this, the output of the 
smiths was increased forty per cent. In addition to this great 
improvement, the cost of fuel was also reduced more than one- 
half. 

To obtain the best results, a manager or an engineer should 
be fully informed of all fundamental conditions, and all sur- 
rounding circumstances. He is then in a position to take up 
the work intelligently; he knows where the large savings can 
be effected. He does not at first bother with the small sav- 
ings which may be possible, but immediately attacks the large 
losses, in order that he may make the great reductions in cost 
immediately, and will later give his attention to the small 
losses. 

Stop-watch time studies give this information, and they 
give it in such a way that the remedy is pointed out. or at 
least suggested. Knowledge of conditions, as given by time 
studies, is the first step towards an economical administration ; 
it is a step which leads to scientific management. 



CHAPTER XI 

The Principles of Scientific Management Which can 
be Followed by a Manager 

In recent hearings before the Interstate Commerce Commis- 
sion, the testimony of such engineers as Gantt, Emerson, Go- 
ing, Gilbreth and others that tremendous improvement can 
be made in all classes of industrial work by scientific methods, 
startled the newspaper and magazine world. The newspapers 
and magazines have given the work of Mr. Taylor, and other 
progressive engineers who have followed his methods, wide 
publicity, and this has excited the interest, not only of engi- 
neers, but also of the general public, in scientific management. 
This will materially aid in the advancement of the cause of 
scientific management and it is probable that more progress 
will be made in the next five years than has been made in the 
past twenty years. 

It will, however, be a number of years before the principles 
of scientific management are generally followed. It will take 
time for these principles to be understood, and it will take 
even longer to master the detail methods which should be 
used in applying these principles. Again, many managers and 
engineers who have followed with considerable financial suc- 
cess the ordinary type of management will at first see little 
reason for changing to the new type. 

It will also be difficult to find competent men to introduce 
scientific methods. It requires not only ability but also long 
experience to become an expert in Scientific Management. 
Mr. Taylor in his paper on " Shop Management " states, " The 
first step after deciding upon the type of organization, should 
be the selection of a competent man to take charge of the in- 
troduction of the new system ; and the manager should think 
himself fortunate if he can get such a man at almost any 

137 



I38 COST KEEPING AND SCIENTIFIC MANAGEMENT 

price, since the task is a difficult and thankless one and but 
few men can be found who possess the necessary information 
coupled with the knowledge of men, the nerve, and the tact 
required for success in this work." The services of the few 
men who are competent to introduce this type of management 
will be in great demand, and for the next few years the supply 
of competent men will not meet the demand. 

Any manager who attempts to introduce this type of man- 
agement without the aid of an expert will fail, but much can 
be done by managers to improve conditions which exist in 
many establishments. In making changes the steps taken 
should always be towards scientific management; not only 
will these steps better conditions, reduce inefficiency, and 
thereby reduce costs, but they will arouse, first, interest, and 
later, enthusiasm for the best form of management. 

I shall attempt to outline steps which can be undertaken by 
the manager, and which in thousands of shops will bring im- 
provement. 

Mr. Taylor lays emphasis upon the necessity for every man 
in an establishment, high and low, having a clearly defined 
daily task laid out before him. We must, however, creep 
before we walk. In thousands of establishments the duties 
of partners and important officials are so loosely defined that 
in many cases it is difficult or impossible to tell where the 
work of one ends and another begins. Before a daily task can 
be laid out, the duties of each must be clearly defined. In 
many establishments important officials do not know their 
duties; they, of course, have duties assigned them, but they 
cannot define with any exactness the detail work that they 
should accomplish. The superintendents, foremen, and me- 
chanics have little idea of the detail duties and authority of 
each official of the company. These conditions lead to much 
confusion, constant irritation, many delays, and consequent 
inefficiency. Many will no doubt seriously question that the 
description given applies to the general run of industrial estab- 
lishments. I hope that they are right and I am wrong, but 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 1 39 

my observation leads me to believe that the conditions stated 
are more or less general. 

It is the exception to find detailed written instructions 
clearly defining the duties and authority of important officials, 
much less subordinate officers, foremen, assistant foremen, 
etc. Many will claim that even if there are no written in- 
structions, each man's duties and responsibilities are defined, 
and that each knows the boundaries of not only his own du- 
ties, but also those of the other important officials of the es- 
tablishment. This is very rarely true. A test of the correct- 
ness of this statement is to require each official to make a 
written statement defining in detail his duties and responsi- 
bilities ; also require each to define the general duties of other 
executive officers with whom he does business. The general 
manager should also attempt to make a diagram showing the 
important functions of each member of the organization and 
their relations to each other. 

In many establishments these tests will bring surprising 
results; it will be found that duties and responsibilities over- 
lap and that few have a clear idea of their own duties or 
those of officers with whom they each day deal. The general 
manager will also frequently find that he has difficulty in mak- 
ing a satisfactory diagram of the organization. 

In establishments where these unsatisfactory conditions ex- 
ist the first step is to determine the duties and responsibilities 
of every general and subordinate official, and it should always 
be borne in mind that responsibility should be accompanied 
by its corresponding measure of authority. When the duties 
of each have been determined they should be clearly defined in 
writing, not only for the information of the official concerned, 
but for the information of all holding positions of authority. 

A diagram of the organization should also be prepared 
which will show the general limits of authority and responsi- 
bility of each head of department or division, and will indi- 
cate their relations to each other. This should be posted 
throughout the works in order that everyone in the establish- 



I4O COST KEEPING AND SCIENTIFIC MANAGEMENT 

ment may know the general scheme of organization, and the 
limits of authority of all responsible officers. 

The organization should be such that dissimilar duties will 
not be assigned to the same man. Similar duties should, as 
far as possible, be brought together to be performed by one 
man or group of men, and the men selected for these duties 
should be the ones who are best qualified for the work. There 
are very few men who excel in many different lines of work. 
Even with men of great ability it will be found that they us- 
ually excel in but one line of work, and this is the line to 
which they have devoted their time and talents — that on 
which they have specialized. 

In many of the large and important establishments through- 
out this country little attempt is made to carefully group 
work of a like nature under one head. In some of the largest 
and most important shipyards, employing five thousand or 
more men, the organization provides for about half of nearly 
a score of shops to be under the manager of the Hull De- 
partment and half under the manager of the Machinery De- 
partment. 

The work in some shops under one manager is very similar 
to work in other shops under the other manager. In shops 
where the work is dissimilar the same methods and the same 
type of organization can be employed to advantage. The 
erection work is dependent upon the shop work, and very often 
the work in one shop is dependent upon the work in another; 
to secure satisfactory results it is essential that there should 
be cordial coordination and cooperation not only between 
the two managers, but also between the various shop fore- 
men. 

The control of these shops should be vested in one depart- 
ment; there should be one shop superintendent who has con- 
trol of all shops and the work in them. In time this 
superintendent will have a planning department to direct all 
operations. With this kind of an organization tools, meth- 
ods, etc., are standardized, and there will be cooperation and 
coordination between the shops. This is nothing more than 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT I4I 

Mr. Taylor's functional foremanship applied higher. The 
shop superintendent should be chosen from men who are 
experts in shop management. He will bring the numerous 
shop organizations of the establishment into one homogeneous 
organization. He will give the shops expert supervision 
where before they received little or no supervision other than 
that given by the foreman. 

I doubt if in any shipyard where the organization described 
exists either the manager in charge of the Hull Department 
or the manager of the Engine Department will willingly allow 
the shops now under their general supervision to go under 
the control of a shop superintendent — even if they know 
that the man to fill the position is an expert. This disposition 
is not only due to the natural inclination to hold on to what 
one has, but each of these managers has the fear that if 
he lets the shop go from under his control he will not get 
good service ; he believes that the work belongs to him and 
that he can do it better than anyone else, and believes that 
if the shops should go under a shop superintendent delays 
in the progress of work will be the result. 

This is the same condition and the same feeling that Mr. 
M. L. Cooke found among the leading universities of this 
country. Instead of functional duties Mr. Cooke found that 
important professors devote a large part of their time to 
work for which they are not fitted and which can better 
be done by others. Yet in nearly all cases these professors 
wish to retain this extraneous work. Mr. Cooke gives one 
striking example : In one university there are three machine 
shops within the college grounds, and each of these is directed 
by one or more college professors, weighted down as they are 
with other functions foreign to this one. Mr. Cooke states, 
regarding the attitude of the professors towards centralized 
management for the shops, " Every one of the professors 
is firmly convinced that, if his particular shop were under the 
control of anyone outside his department, ( 1 ) he would have 
to wait longer for things, (2) the work would not be so well 
done, and (3) would not cost less." Yet everyone who has 



142 COST KEEPING AND SCIENTIFIC MANAGEMENT 

experience in shop management 'knows that centralized man- 
agement of these shops will be of advantage not only to the 
university but also to each individual department. 

A shop superintendent who attempts to place the shops on 
a functional basis, encounters similar opposition when he 
begins to rearrange the duties of the various foremen and 
assistants. The belting in a group of shops located near each 
other had been cared for in a systematic manner by a prop- 
erly instructed belt man with adequate equipment, for several 
years with excellent results. It was desired to extend the 
system to take in a group of wood-working shops located 
about three hundred yards away. The foreman joiner was 
surprised that I should make such a proposition, and after 
making general objections to the scheme, exclaimed, " Ac- 
cording to these instructions, if the belt on the sticker breaks, 
no man in the joiner shop is allowed to lace the belt, but I 
must 'phone to the machine shop to have the belt man do a 
little job that can be done by half a dozen men in the 
joiner shop." I answered, " Exactly, Mr. Smith, but we 
don't expect belts to break." Mr. Smith interrupted me before 
I finished — " But they do break, I had three break last 
zveekl" If I had needed any convincing proof of the need 
of a belt man in that shop I had it there. I explained to 
Mr. Smith that we intended to prevent breaks in belts, and 
directed him to make a personal report to me of every belt 
failure in the shop after the instructions went into effect. 
He was satisfied that he would make many reports, yet not 
one was made; there was not a failure in the shop for over 
two years. 

The industrial world should free itself from the slavery 
of the idea that to get a thing done well you must do it your- 
self". Every successful specialist is living proof that this is 
not true. In functional management each man performs 
those functions which he is best fitted to perform, and he 
is not allowed to do work of which he has not expert knowl- 
edge, nor is he allowed to do work which can be done as well 
by a man of less value. 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 143 

The Hull Manager and Engine Manager should realize 
if they give consideration to the subject that an expert shop 
superintendent will in time give far better service than is 
obtained under present conditions. Not only will this change 
be of benefit to the whole plant, but it will directly benefit the 
two individual departments. The shop superintendent must 
make good to retain his position. He understands that every 
delay, if but a few hours, will now be noted, while under 
the old organization delays of days went unnoticed. In a 
short time there will be no delays; work will be so arranged 
that when a new job comes into the shop a promise can be 
given of the day on which it will go out, and the promise 
will be kept. 

This is a change in organization and methods which can 
be made by a manager, and is one which will bring excellent 
results, and at the same time is a step towards scientific man- 
agement. 

In a similar manner careful consideration should be given 
work assigned to all executive officers with the view of 
arranging for functional management. Each head of depart- 
ment or division should interest himself in the general prin- 
ciples of scientific management, and slowly but surely should 
bring about changes in his department — each change being 
a step towards the goal of scientific methods. In this man- 
ner improvement can be made, and at the same time a most 
important result will be achieved, that is, many will become 
interested in the new form of management and some will 
become enthusiastic; and as the possibilities are month by 
month unfolded all will finally be convinced of the necessity 
of obtaining the scientific type of management in all of its 
details. 

It has already been stated, and it should be emphasized, 
that it will be impossible for a manager or a subordinate to 
introduce in any establishment the scientific methods which 
are advocated by Mr. Taylor and his associates. This can 
not be done with any success without the services of an expert. 
The manager and heads of departments can, however, do 



144 C0ST KEEPING AND SCIENTIFIC MANAGEMENT 

much which leads to scientific methods, and in this and sub- 
sequent chapters I shall describe methods which can be under- 
taken by a manager, and if followed will increase output. 

If an expert is finally employed to install the system in all 
its details the preliminary work which has been done by the 
manager will make the path of the expert easy and the work 
can be completed in less time than would otherwise be re- 
quired. Not only will the physical conditions in the shop 
be right for the system, but, what is more important, the 
manager and his assistants will already be convinced of the 
advantages to be gained by further extension of scientific 
methods. The expert will therefore have little or no oppo- 
sition; on the contrary, he will have assistance in every step. 
Under these conditions he will expend all his energy in build- 
ing up and not expend a great deal of his time and energy 
in holding up the little which he has already built, which is 
sometimes the case when manager and assistants are not in 
entire sympathy with the changes. 

In undertaking preliminary steps towards scientific meth- 
ods, the manager and heads of departments* should confine 
their efforts to changes which will not antagonize the work- 
men. No attempt should be made to establish a bonus system 
of payment or a piece-rate system. This, together with the 
rate-making department, should be left for the expert. 

Other changes, however, can be made which will greatly 
improve the unsatisfactory conditions which are found in 
many shops. To illustrate, I shall take a large establishment 
like the shipyard to which reference has been made and 
assume that a qualified shop superintendent has been ap- 
pointed, and will indicate the steps which he can take to 
improve conditions. 

The first step taken by the shop superintendent is one which 
will be disapproved by the majority of old-time managers 
and owners, for he will immediately obtain several compe- 
tent assistants. To many managers efficiency varies inversely 
as the number of non-producers, and the efficient head of 
department is the one who can show low expense accounts. 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 1 45 

Sometimes a competent man in the position of shop superin- 
tendent, fearing adverse criticism, will attempt to carry on 
the current work and at the same time make improvements 
without the aid of assistants. This is a mistake which is 
not only of disadvantage to the establishment, but will in 
nearly all cases result disastrously for the superintendent. 
Before accepting the position, the general methods to be fol- 
lowed should be outlined to the management, and it should 
be made clear that competent assistants will be required. 

The shop superintendent will at first have the opposition of 
the foremen of the several shops. This is to be expected, 
for while in the past these foremen have nominally been under 
the supervision of the managers of the two departments, they 
have been allowed to run the shops as they saw fit, subject 
only to the general directions of the managers, while under 
the new regime the shop superintendent will actually control, 
and he will establish standards which must be followed. The 
opposition will eventually disappear, but at first the superin- 
tendent will have but little assistance from the foremen in 
changes undertaken. The superintendent must, therefore, be 
sure of his ground, and a thorough study must be made of 
conditions. 

In investigating conditions, it is desirable that a single duty 
or investigation should be assigned to an assistant, and he 
should continue on this duty until the desired results are ob- 
tained. For example, the investigation of small tools should 
be assigned to one assistant, belts to another, maintenance of 
machine tools to another, or a single assistant should take 
up these subjects one at a time. 

It should be remembered that while investigations and 
changes are being undertaken, that the output in the shops 
must not suffer. The work must be completed as quickly 
and as cheaply as before, and soon there must be evidence 
of improvement. The superintendent at first must devote 
a great deal of his time to current work and routine matters, 
and he should in the beginning assign one assistant to follow 
up work and remove difficulties which cause delays. Delay 



I46 COST KEEPING AND SCIENTIFIC MANAGEMENT 

of work will be the most frequent complaint and whether these 
complaints, compared with previous performances, are just 
or not, all cause for complaint must be removed. Above all 
things the work must go through the various shops promptly. 

No changes should be made until thoroughly investigated 
and the effects fully considered. The assistants assigned to 
definite tasks should be required, after full investigation, to 
make complete written reports describing existing conditions 
and changes recommended, with a statement of the probable 
result of the proposed changes, if carried into effect. This 
method in the first place trains the assistant ; the superin- 
tendent will no doubt find omissions in the reports, and points 
which have not been considered, and the assistant should be 
required to go over the subject again; this tends to make the 
assistant thorough. It also insures that every change will 
be fully considered, and that there will be no snap judgment. 

The superintendent, after considering the report, should 
make such investigation as he considers necessary to verify 
the statements of the assistant. He will then decide the 
changes to be made, and will indicate these to the assistant, 
who will prepare detail written instructions to govern the new 
methods. These will be passed on by the superintendent, and 
when approved by him will be issued as orders to the shops. 

It will then be the assistant's duty to not only see that the 
instructions are carried out, but he must be the instructor 
who is to teach the foremen, assistant foremen and others 
the new methods; he must be ready to remove all difficulties 
and must see that the change is accomplished with the mini- 
mum irritation and friction. To accomplish satisfactory re- 
sults it is evident that the assistant must have mastered the 
subject — he must have become an expert on that particular 
work. This is of great importance and the experienced and 
wise superintendent will satisfy himself, before he issues in- 
structions for the change, that the assistant has in reality 
mastered every detail and has fully considered the effect of 
every change in methods. 

If every proposition is fully considered in the manner indi- 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT I47 

cated, there will be no going backward ; there will be no put- 
ting changes into effect " on trial," and there will be the 
minimum interference with the work in the shops. 

SMALL TOOL EQUIPMENT. 

One of the important questions to consider is the small tool 
equipment. In the majority of shops an investigation of this 
subject with intelligent changes will result in great improve- 
ment. 

The kinds of tool steel that are to be used for various pur- 
poses must be determined and should be made standard. It 
is most unsatisfactory to have two or more kinds of tool steel 
for the same purpose, yet in many shops little attention is 
given to this subject. It is very common to see twist drills 
of carbon steel and high speed steel issued indiscriminately 
from the tool room; a workman will receive a carbon steel 
drill and when this is dulled it will be replaced by a high speed 
drill, or vice versa. Rate making or standard times are ob- 
viously impossible under these conditions. 

Tool steel of uniform quality must be obtained for lathe, 
planer, shaper tools, etc. The Navy Department has, with 
the assistance of civilian experts, developed specifications for 
tool steel by means of which steel of uniform quality can be 
obtained and at the same time competition secured. The 
specifications are not given here, as they must necessarily 
change with the advances made in the manufacture of tool 
steel, but they can be obtained either from the Navy Depart- 
ment or the tool makers. In commercial shops it will usually 
be satisfactory to select certain brands of high grade tool steel 
and adhere to these. 

The quality of tool steel having been settled the size and 
shape of tools for various purposes must be determined. In 
the average shop the sizes and shapes are almost as numerous 
as there are men in the shops. The standard sizes should 
be as few as possible, yet should be sufficient for the general 
run of work. The shape of tools has been fully investigated 
by Mr. Taylor and his associates, and it is only necessary to 



I48 COST KEEPING AND SCIENTIFIC MANAGEMENT 

follow the standards described in Mr. Taylor's book, " The 
Art of Cutting Metals." A grinding machine which will 
accurately produce the standard shapes can be purchased at 
reasonable cost. It will therefore require but little investi- 
gation to decide on standard shapes, and to obtain the means 
for obtaining standard tools. 

The next step is to obtain an ample supply of tools, and 
to have grinding for all shops done in a central grinding 
room, with a central tool issuing room adjacent to the grind- 
ing room. The dulled tools should be collected each day from 
the shop tool rooms and replaced with sharpened tools. The 
tools to be ground are segregated and ground in quantities. 

All grindstones should be removed from the shops proper, 
and the workmen should be prohibited from grinding tools. 
The grinding of all standard tools should be accomplished 
in the central grinding room, but special tools may be ground 
in the shop tool room. The workmen should not be allowed 
to go to the tool room for tools, but the tools should be 
supplied to the machines by tool boys. 

The shop tool issue room should be conveniently located 
and should be arranged for a neat and compact stowage of 
tools. There should be a correct card inventory of every tool 
and appliance stored in the issue room and this should be 
kept up-to-date. The double check system should be used 
for issuing tools ; the man's check with his number is hung 
on the tool rack, while the tool check, giving the name of the 
tool, is hung on a hook under the man's number. In this way 
a tool can be immediately located, or the number of tools 
issued to each man determined. 

When edged tools are turned in to the issue room they 
should not be put back in the racks on the inspection of the 
laborer or helper who issues tools ; all edged tools turned in 
should be placed in tote boxes, and once a day a competent 
tool maker should visit the issue room to inspect the tools 
turned in. Measuring instruments should be treated in the 
same manner. By this method the tools issued are always 
in good condition. 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT I49 

The breakage of tools requires consideration; if men are 
taken to task every time they break a tool, they will nurse the 
tools, and a reduction in output will be the result; on the 
other hand, if no action is taken regarding broken tools there 
will be much carelessness and the breakage will be large. A 
middle course must be pursued; in the case of small taps, 
drills, or tools liable to break, no action should be taken when 
a tool is broken other than record it; in the case of a valuable 
tool, or when it appears that carelessness is the cause, the man 
should be required to submit on a regular form a " damage 
report " which brings forth a full investigation of the cause 
of the breakage. 

At the end of the month there should be posted in the shop 
bulletin board a record of tools broken during the month; 
this should contain the names of the men and the tools broken 
by each ; a copy of this record should be furnished the shop 
superintendent. When men damage tools or machines 
through carelessness, or habitually break small tools, the facts 
should be noted on the offender's record card. 

The tool issue room should be arranged so that needed 
expansion can be obtained without difficulty. In time not 
only will tools be kept in this room, but also every appliance, 
every bolt, every block needed to carry on the work will be 
stored here, and expansion of the issue room will probably 
be necessary. The reason for keeping all tools, appliances, 
etc., in the tool room is the necessity for standard conditions, 
which, with Scientific Management, is an essential requirement. 
The rate setter will make a rate or a standard time on the 
assumption that tools, bolts, blocking and other appliances 
are in perfect condition. When the workman goes to set his 
work and bolt it up he finds the threads on the bolt are burred 
and he has to use a wrench to run the nut down, instead of 
doing this by hand as the rate maker has estimated; in other 
words, the conditions are not standard, and without standard 
conditions there can be no accurate rate setting. If bolts, 
blocking, fittings, etc., are left at the machines they will not 
be kept in good condition, and it is only necessary to inspect 



15O COST KEEPING AND SCIENTIFIC MANAGEMENT 

such fittings at the machines in almost any shop to obtain 
ample verification of these statements. 

There is still another important reason for keeping all tools 
and fittings in the tool room. When work is routed, and 
detail instructions issued to the workmen, it will be one of 
the duties of the planning department to make a tool list 
giving every tool, bolt, rigging, etc., that will be required to 
perform the work. It will be the duty of the tool issue room 
to collect these tools, and the duty of the gang boss to see that 
all the tools in good condition are delivered to the workman 
before he is ready to undertake the work. Unless all tools 
and appliances are kept in one place, that is, the tool room, 
it will be difficult for the tool room keeper or the gang boss 
to carry out these duties. 

It will not be possible in the establishment under considera- 
tion to put in effect the system which requires the duties out- 
lined, but the ideal system should always be kept in view, 
and every change made should be in the general direction of 
the ideal system. It should be the hope and aim of the shop 
superintendent and his assistants, and eventually of every 
foreman, to reach the ideal system. If this be always kept 
in view, the path of the expert who finally comes to install 
the system in its entirety will be an easy one. 

In connection with the small tool equipment, consideration 
should be given to the tool-making and repair department, or 
the tool room proper. After considerable experience and 
study of this subject I am convinced that in a machine shop 
managed in accordance with scientific principles there is no 
need of a tool room, and that all tool making and tool repair 
work should be carried out in the machine shop proper. Spe- 
cial machines and specially qualified men will no doubt be 
engaged at all times on tool work, but this is no reason why 
they should be put in a separate room and not subject to the 
same rules as the shop proper. 

There is much money wasted in tool rooms; the men are 
not under the same discipline and the same supervision that 
is given the men in the shop ; the output in the tool room is 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT I5I 

usually lower than in the shop; a great deal of work is done 
in the tool room by highly-paid tool makers that should be 
done by low-rate machinists; there is often a duplication of 
machine tools that is unnecessary — often there are machine 
tools in the tool room which are rarely used, while they could 
be used to advantage in the shop. There are tool rooms 
which are not subject to these criticisms, but the average is 
about as described. 

Is there any good reason why the tool makers should be 
separated from the shop proper? I am satisfied that there 
is not ; all tool work, whether new or repair work, should 
be treated exactly as the other work in the shop; it should 
be analyzed, routed and rates fixed as will be the case for the 
regular w T ork. Work requiring extreme accuracy will be 
routed to the tool makers who are best able to do the work, 
and the planning department will exercise expert judgment in 
this, as in all matters over which it has jurisdiction. If the 
tool room is abolished and the scheme outlined is followed, 
it will be found that in a very short time the force of expert, 
highly paid tool makers will be considerably reduced, and that 
the output will be equally as satisfactory. 

It may not be advisable to abandon the tool room until the 
planning room and all that goes with it, is firmly established, 
but in making the preliminary changes necessary in the tool 
issue room and tool room the eventual abandonment of the 
tool room should be kept in mind. 

CARE OF BELTING. 

Perhaps next in importance to the small tool equipment is 
the care of belting. The losses due to poor belting, and the 
lack of care of belts is now generally known, yet in many 
shops little attention is given to this important subject. 

In the average shop the assistant who is assigned " belts " 
as a duty will have a field which will bring quick results. 
Fortunately he will not have to seek far to obtain definite 
information and instructions regarding the care of belts. In 
a paper on belting read before the Society of Mechanical 



152 COST KEEPING AND SCIENTIFIC MANAGEMENT 

Engineers by Mr. Fred W. Taylor, and in a paper read before 
the same society by Mr. Carl G. Barth on " The Transmis- 
sion of Power by Leather Belting," will be found all the infor- 
mation required for a complete understanding of this subject. 
There is also manufactured and sold at a reasonable price a 
tension belt bench, together with the necessary outfit, record 
cards, etc., for properly caring for belting and keeping a 
record of the belts. 

Ordinarily but little investigation will be required to show 
that the condition of the belts is poor; a casual examination 
will prove this. The investigation, however, should be thor- 
ough and an accurate record made of conditions. The meth- 
ods followed in fitting new belts and caring for belts should 
be described, the records of belting (if any) should be ex- 
plained, and the actual condition of the belts should be fully 
described. 

A full investigation of every subject undertaken trains the 
assistant to be thorough, and moreover it is important to 
know and record conditions before changes are made in order 
that the value of the changes can be measured. 

Detailed written instructions governing the care of belts 
and the records to be kept should be issued, and the assistant 
who investigated the subject should be assigned the duty of 
instructing the foremen, belt man and the mechanics, and he 
should see that the instructions are enforced. 

After the system is in good running order in the machine 
shop it should be extended to the other shops. The belt bench, 
belt supplies, etc., should be located in a central station con- 
venient to all of the shops, and the belt man and necessary 
assistants should operate from this station. If the machine 
shop is not too far removed from a central location it is usually 
the shop in which the belt station should be placed. 

The illustration, Fig. 14, shows a central belt-repair sta- 
tion for machine shop, smith shop, pipe shop, ship-fitters' shop, 
wood-working shop, electrical shop and boiler shop at the Mare 
Island Navy Yard. 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 



153 



CARE OF MACHINE TOOLS AND TRANSMISSION MACHINERY. 

In a " day work " shop where there is little or no incentive 
for the men to turn out the maximum amount of work, the 
condition of the machine tools will probably be poor. Many 
men will let their machines go from bad to worse, with a 
continually decreasing output, without reporting the fact, until 




Fig. 14. Central Belt Repair Station at the Mare Island Navy Yard. 

a complete breakdown and stoppage of work make a report 
obligatory. 

Much improvement can be accomplished by keeping the 
machine tools and appliances in good condition, and this is 
essential when scientific management is finally realized. If 
standard times or standard rates are to be set with exactness, 
all of the conditions under which the work will be done must 
be known and these conditions must be realized when the 
work is performed. One of these important factors is that 
the machine tools and appliances must be in excellent condi- 
tion, and these conditions must be standard — that is, must be 



154 C0ST KEEPING AND SCIENTIFIC MANAGEMENT 

maintained. In the great majority of shops the condition of 
the machine tools is far from excellent, and no provision is 
made for standardizing conditions. 

A full investigation should be made of the condition of the 
machine tools and transmission machinery, particularly line 
shafting. In many shops it will require a considerable expen- 
diture of money to put the equipment in efficient condition. 
Usually the shafting will be found out of line, bearings in bad 
shape, and many of the machines out of adjustment; it will 
also frequently be found that the attachments and equipment 
for the machine are misplaced or in poor order. These con- 
ditions must be corrected, even if it costs much money. The 
new superintendent knows that the shop expenses will rise 
materially while poor conditions are being made good, and 
he should have pointed this out to the management before he 
accepted the position of superintendent. 

After these defects are corrected, arrangements must be 
made to keep them corrected. This can only be done by 
obtaining the right man and making him responsible for the 
condition of the machine tools and educating him to care for 
them ; we thus have the " repair man." He should be directly 
responsible for the machines and transmission machinery. 
It is his duty to see that each workman keeps his machine 
clean, free from rust, and that standards established for the 
care and maintenance of the machines and their accessories 
are rigidly maintained. After the repair man is selected, he 
should be carefully instructed in his duties, and coached for 
several weeks. All gang bosses and mechanics must report 
to him any defects in tools and machinery, or anticipated 
trouble. 

CARE OF JIGS, SPECIAL TOOLS, ETC. 

What jigs, special tools, etc., are on hand, and on what 
jobs can they be used? 

Does it seem possible that in many shops this question can- 
not be answered? Yet this is true; in many shops the jigs 
and special tools are stored in various places or are left where 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 







last used in the shop, and there is no record of these tools, 
or of their uses. In some cases jigs and special tools on 
hand are not used on a job where they can be used to advan- 
tage, because the foreman did not know of the existence 
of these tools, or had forgotten them. 

All tools of this kind should be collected and those which 
can be used should Le put in good condition and a stowage 
provided in the tool room. All tools should be marked, and 
there should be a card index in the tool room and another, 
giving in detail the uses of these tools, in the planning depart- 
ment. Until a planning department is obtained, the man who 
routes the work must know the jigs and special tools that are 
on hand and their uses. 

FUNCTIONAL DUTIES. 

Nothing has been said in the improvements so far outlined 
regarding functional duties. The shop superintendent will 
wisely say little about the changes he is making or intends to 
make; he must overcome a great deal of prejudice and some 
direct opposition. He must go about his work quietly and 
make good on every change that he makes. For this reason 
he selects in the beginning the propositions which afford the 
largest opportunities and where the changes will affect but 
few men; he at first takes up work that has been nobody's 
job and in this way he offends no one. 

He has said nothing about functional management, yet 
quietly and without parading the fact, he is slowly putting 
into effect functional management. He has a belt man solely 
responsible for care of belts; a repair man charged with the 
care of machine tools, and slowly but surely the various duties 
in the shop which are of great importance, but which in the 
past have been no-man's job, are investigated, classified, like 
duties brought together, and the methods standardized; then 
the right men for these duties are selected and carefully 
trained and are finally put in full charge. There are many 
of these small duties in the shops which are considered be- 
neath the notice of the foreman, yet it will pay handsomely 



I56 COST KEEPING AND SCIENTIFIC MANAGEMENT 

to have an expert study and standardize these duties and in- 
struct men as to the best methods to be followed in performing 
them. 

The new shop superintendent is no longer new; he now 
knows all of the supervisory force well — he knows their 
strong points and their weaknesses; he has already decided 
which of these will oppose his improvements ; he has a very 
good idea of the ones that he can bring over to his side and 
the ones that will have to go. When he is sure of the latter 
class, the quicker he lets them go the better, for he should 
not expend energy in attempting to convince a man who will 
not be convinced, and moreover a man of this kind has influ- 
ence in the shop and it is well to remove it as soon as possible. 
The superintendent has also learned the capabilities of many 
of the best men and knows their attitude towards the new 
administration and towards the changes that have been made. 
He knows where there are possibilities for gang bosses and 
assistants. 

It is well at this point to warn the new superintendent 
against bringing in from outside the plant too many assistants, 
gang bosses, etc. It is, of course, very desirable that the 
superintendent should have assistants who have worked with 
him and know his aims and his methods. It is also desirable 
in nearly all cases to introduce some new blood, but too much 
new blood is dangerous. It intensifies the opposition of fore- 
men, assistant foremen and mechanics, as they are led to be- 
lieve that the superintendent is prejudiced and sees nothing 
good in the personnel of the old organization and that event- 
ually all of the bosses will be replaced by outsiders; it discour- 
ages ambitious mechanics who expected to rise with the new 
administration; it reflects on the judgment of the superin- 
tendents who formerly exercised control over the shop, and 
these superintendents are in positions of responsibility, where 
they can assist or oppose the efforts of the shop superintendent. 
The shop superintendent will do well to confine the new blood 
to his personal assistants and fill all other positions from the 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 1 57 

old force, unless it is impossible to find men who can be 
trained for the positions. 

The superintendent is now in a position where he can make 
changes with confidence; he has secured the respect and con- 
fidence of not only the management, but also of many of 
the men; the time is ripe for the open application of func- 
tional management as applied to foremen and gang bosses. 

Mr. Taylor in his paper on Shop Management describes the 
new type of management as follows: 

' Functional Management ' consists in so dividing the 
work of management that each man, from the assistant super- 
intendent down, shall have as few functions as possible to 
perform. If practicable the work of each man in the man- 
agement should be confined to the performance of a single 
leading function. Under the ordinary or military type the 
workmen are divided into groups. The men in each group 
receive their orders from one man only, the foreman or gang 
boss of that group. This man is the single agent through 
which the various functions of the management are brought 
into contact with the men. Certainly the most marked out- 
ward characteristic of ■ Functional Management ' lies in the 
fact that each workman, instead of coming in direct contact 
with the management at one point only, namely, through his 
gang boss, receives his daily orders and help directly from 
eight different bosses, each -of whom performs his own par- 
ticular function. Four of these bosses are in the planning 
room and of these, three send their orders to and receive their 
returns from the men, usually in writing. Four others are 
in the shop and personally help the men in their work, each 
boss helping in his own particular line or function only. Some 
of these bosses come in contact with each man only once or 
twice a day and then for a few minutes perhaps, while others 
are with the men all the time, and help each man frequently. 
The functions of one or two of these bosses require them to 
come in contact with each workman for so short a time each 
day that they can perform their particular duties perhaps for 



I58 COST KEEPING AND SCIENTIFIC MANAGEMENT 

all of the men in the shop; and in their line they manage the 
entire shop, while other bosses are called upon to help their 
men so much and so often that each boss can perform his 
function for but a few men, and in this particular' line a num- 
ber of bosses are required, all performing the same function 
but each having his particular group of men to help. Thus 
the grouping of the men in the shop is entirely changed, each 
workman belonging to eight different groups, according to the 
particular functional boss whom he happens to be working 
under at the time." 

Again, Mr. Taylor, in "The Art of Cutting Metals," in 
the following words applies the principles of functional man- 
agement to future great achievements : " The time is coming 
when all great things will be done by the cooperation of many 
men, in which each man performs that function for which he 
is best suited, each man preserves his own individuality and 
is supreme in his particular function and each man at the 
same time loses none of his originality and proper personal 
initiative, and yet is controlled by and must work harmoniously 
with many other men." 

The superintendent should understand these general prin- 
ciples of functional management and should, step by step, put 
them in effect. Before any step is made in this direction, 
however, the superintendent's most experienced assistant 
should make a thorough study of the situation and the super- 
intendent himself should devote considerable study to it. 

It will probably appear that considerable rearrangement 
of machine tools is necessary. Unless the shop superintendent 
has had much experience in functional management he should 
not undertake any radical rearrangement of machines and 
equipment. Now is the time that the expert organizer should 
be brought in to carry out the complete reorganization. If 
this cannot be accomplished, the services of such an expert 
should be obtained for consultation regarding this particular 
feature of the general improvement. 

The size and location of the planning department should 
also be settled at this time, and the advice of an expert is of 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 1 59 

value on this subject. Before real scientific management is 
obtained, and when the organization is in the stage which 
we may call " near " scientific management, there will be a 
planning department which will control the work of the shop, 
but not in the detail and not in the satisfactory manner that 
Mr. Taylor's planning department with its scientific rate-fixing 
department controls the work. But while providing a " near " 
planning department, the ideal should be kept in view, and 
provision should be made for the necessary expansion. 

Following Mr. Taylor's typical organization a shop superin- 
tendent can assign the work so that each man has as few 
functions as possible to perform. In every shop this change 
in itself, without any other, will be of material, benefit. Great 
improvement can be made in this direction by managers and 
superintendents without the assistance of an expert organizer. 
The assignment of duties which Mr. Taylor found satisfactory 
at Midvale and Bethlehem will be applicable to any machine 
shop, and with slight modifications are applicable to any shop. 
In addition to the repair man and the belt man, the duties of 
which have already been described, there should be three types 
of functional bosses in each shop, viz. : the gang boss, the 
speed boss, and the inspector, and the number of these will 
depend on the size of the shop and the general character of 
the work. The duties of these are given in Chapter XII. 

PLANNING DEPARTMENT. 

The next step to be considered is to put in operation a 
planning department. This department will be far short of 
the ideal, but nevertheless it will be an improvement. Any 
manager or engineer who has given any consideration to 
scientific methods in shop management must be impressed 
with the necessity in the great majority of shops of improved 
methods for planning the work. In many shops there is no 
planning worthy of the name. 

While it is impossible for a manager or shop superintendent 
to develop a planning department which will plan the work 
in all its details, it is possible for a manager or shop superin- 



l60 COST KEEPING AND SCIENTIFIC MANAGEMENT 

tendent to develop a department which will plan the main 
operations and route the work. Such a planning department 
will analyze the work when orders are received and will see 
that sufficient information is on hand to proceed with the 
work; it will make a complete list of the material required, 
and will notify the storekeeper to reserve the material on hand 
for the job, and will notify the purchasing department of the 
material to be purchased and when required ; it will order the 
patterns of the pattern shop, the castings of the foundry, and 
the forgings of the smith shop; it will decide if it is advan- 
tageous to make jigs or special tools and if so will order them ; 
it will decide in general how the work shall be done and will 
route the work to the machines and prepare written instruc- 
tion cards describing what is to be accomplished. All of these 
duties will be performed not as required, but when the order 
is received, and the job is analyzed. 

When the material, castings, forgings, etc., for a job are 
received in the shop the planning department will issue the 
instruction cards and will see that the work is undertaken 
at the proper time and is carried through the shop in proper 
order. The planning department will establish standard meth- 
ods for work, and will see that all established standards are 
adhered to. It will be the source of information for the shop, 
and it will receive and act on all reports from gang bosses, 
speed bosses, layout men, inspectors, repair man, etc. It will 
leave the foreman free from details, in order that he may give 
his attention to the big things, and to the unusual. The fore- 
man thus becomes in a way the " Exception man." 

This kind of a planning department can and will render 
valuable service in the average shop, and it can readily be 
expanded into the scientific planning department. With a 
planning department of this kind the premium system for the 
payment of labor can be used to excellent advantage- 

A planning department can be developed by the manager 
or the shop superintendent, but it is no easy task ; it will require 
work and study, but the results will pay well for the time 
and energy expended. In Chapter XII there is given a de- 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT l6l 

scription of a shop-planning department developed by a man- 
ager, which proved of great value. 

TIME STUDIES. 

The study of unit times, before the best methods have been 
determined and the work standardized, has been declared by 
some to be worse than a waste of time. This is true if this 
study is for the purpose of fixing rates or standard times, but 
if stop-watch time studies are made for the purpose of im- 
provement in methods, the statement is not correct. Time 
studies can be made of great use in exposing defects in meth- 
ods, organization and equipment, and in indicating the remedy. 

In the shops under consideration, when the planning depart- 
ment has been established, the time study work under a com- 
petent assistant should be undertaken. Full records should be 
made of the observed times and surrounding conditions, to- 
gether with a statement of the defects discovered, and the 
recommendations for improvement; one copy of this report 
should go to the planning department and another to the shop 
superintendent. A time-study man should be kept continu- 
ously on this work; he will be invaluable to the planning de- 
partment in improving methods and equipment. 

IMPROVEMENT OF PLANT EQUIPMENT. 

The maintenance of plant equipment is a profitable field 
for investigation. It is of course easy to recommend the 
purchase of thousands of dollars' worth of new equipment ; 
it requires but little consideration to show that better results 
can be obtained with better equipment, and this is the usual 
result of an investigation of this subject. It requires, how- 
ever, a more thorough investigation and more ability and 
knowledge to obtain better results by a better utilization of 
the existing equipment, and in nearly all cases this result can 
be accomplished. The assistant assigned to the investigation 
of the plant equipment should work under the direction of 
the planning department, and in cooperation with the time- 
study man; the observations of the latter should give him 



l62 COST KEEPING AND SCIENTIFIC MANAGEMENT 

many leads which, when followed up, will bring about a better 
utilization of the equipment. 

As the shops of the plant under consideration are for illus- 
tration assumed to be located in a shipyard, it may be noted 
that a very profitable field for investigation is the pneumatic 
plant and the use of pneumatic tools. In a large shipyard the 
pneumatic system is extensive, and losses incurred and which 
may be avoided are ordinarily large. These are wastes due 
to carelessness, such as leaving valves open; and wastes due 
to defects in the system, such as leaks in piping, leaks in hose, 
etc., or improper use of high pressure air. There is also 
considerable avoidable loss due to abuse of pneumatic tools. 
An investigation of these conditions, together with remedial 
measures, will usually result in large savings. 

It will frequently be found that the purchase of a small 
amount of additional equipment, or changes in equipment 
which will require but a moderate outlay, will result in con- 
siderable increase in output. In these cases the investigator 
should be prepared to show by conservative figures that the 
saving is real and not imaginary. In some cases tools are 
purchased which do not pay interest on the investment, and 
too much equipment is an error which is sometimes made. 

In many machine shops, dependence is placed on the over- 
head traveling crane for handling all material to the machine 
tools. In the majority of shops where this is the case, an 
investigation will usually show that there are many delays 
due to waits for the crane, and that many jobs are inefficiently 
man-handled. The installation of a number of light jibs on 
which pneumatic hoists are mounted, for serving the larger 
machine tools, will result in an elimination of waits, and is 
an investment which will pay dividends. The illustration, 
Fig. 15, shows a small machine shop supplied with inexpensive 
jib cranes for serving the larger machine tools. 

There are often gross defects in equipment which may be 
overlooked for years or until a detail investigation, with stop- 
watch time study, reveals them. In a large boatshop, which 
did a large business, and has a splendid equipment of overhead 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 



163 



cranes, machine tools, and other facilities, a detailed investi- 
gation brought out the fact that the cutting of timbers, plank- 
ing, etc., to length was done by hand by highly-paid mechanics, 
and that the shop was not equipped with a power cut-off saw. 
The plant equipment is a most interesting subject for inves- 
tigation, and is a very profitable field. Many will no doubt 
admit that at first this is a good field for improvement, but 





, V *£it$r 





Fig. 15. Small Machine Shop, Mare Island Navy Yard. Note the 
small jib cranes which serve the machine tools. 



it may seem that in a comparatively short time there will be 
little to do. At first thought this seems reasonable, but in 
practice it is not found to be the case, for there is always 
a field with plenty of work for the plant man. Methods of 
manufacture change rapidly and many improvements are made 
in plant equipment. For these reasons in a plant of any size 
it will be of advantage to have at all times in the planning 
department an expert for the maintenance of plant. 



164 COST KEEPING AND SCIENTIFIC MANAGEMENT 



STANDARDIZATION IN ALL THINGS. 

In the manner already indicated, everything in the shop, 
large and small, should be standardized. There must be a 
standard way for caring for machinery and appliances ; stand- 
ard tools, and standard methods for issuing them ; and in fact 
a standard method for every operation in the shops. 

Before any standards are adopted, there must be intelligent 
study and investigation, and the standard shall be the best 
method known to the men in the establishment who are best 
qualified to pass on the subject. 

Every standard which is adopted must be described in detail 
in writing with necessary sketches or drawings to enable it 
to be fully understood. As soon as a standard is decided on, 
it must be put in immediate operation, and must be rigidly 
enforced; there must be no back-sliding, or going back to 
go-as-you-please methods. 

There is little doubt that the methods adopted as standard 
can be improved later, and the standards should be improved. 
Many seem to believe that standardization is a foe to prog- 
ress, and that the adoption of standards precludes im- 
provement. This is far from the truth. Standardisation 
represents the determination by the best talent available, 
the best tool, the best method or the best appliance for pro- 
ducing work, and the adherence to this method until a better is 
determined. 

Mr. Gantt says, regarding standardization, " All work, and 
all knowledge, for that matter, may be divided into two classes, 
Expert and Standard. Expert knowledge may be described 
as that which has not been reduced to writing in such a man- 
ner as to be generally available, or exists only in the minds 
of a few. By analogy, expert work is work, the methods of 
doing which either are known only to a few or have not been 
so clearly described as to enable a man familiar with that 
class of work to understand them. 

" On the other hand, standard methods are those that are 
generally used, or have been so clearly described and proved 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT I05 

that a man familiar with that class of work can understand 
them and safely employ them. 

" The largest problem of our expert is to standardize expert 
methods and knowledge." 

The standard represents the best method known at the time 
it is adopted, but when experience or further investigation 
points out a better method it should become the standard. 
But, the standards must be protected ; changes must not be 
based on whims, or because of the natural tendency of man 
to change a method devised by someone else. No change 
should be made in a standard except upon the written authority 
of the planning department, and this department must author- 
ize no changes until the new methods have been fully inves- 
tigated and it is clearly shown that the change is a real im- 
provement. 

FUNCTIONAL MANAGEMENT OUTSIDE OF SHOPS. 

Considerable space has been devoted to improvements that 
can be made in the shops under the supervision of a competent 
and energetic shop superintendent. It must not be assumed 
that the shops are the only places where improvements can be 
made. 

The manager should require each head of division or depart- 
ment to study and to investigate his department as has been 
outlined for the shop superintendent; if this is done, results 
equally as satisfactory as those obtained in the shops will be 
secured. 

In the main office and the drafting rooms material improve- 
ment can no doubt be made ; in cost-keeping methods and 
storehouse arrangements there is usually a wide field for 
improvement. In these places, as in the shops, the changes 
most prolific in results will be those in the direction of func- 
tional management and standardization. The duties of 
officers, draftsmen and clerks should be made functional, and 
the duties and methods should then be standardized ; after this 
has been accomplished it is possible to lay out each day a 
definite task for each man. 



1 66 COST KEEPING AND SCIENTIFIC MANAGEMENT 

Much can be done by heads of divisions to improve their 
departments if first their interest and then their enthusiasm 
for scientific methods can be aroused. When enthusiasm is 
aroused, study and investigation will follow, and the way for 
improvement will be clearly indicated. 

One of the most important duties of the manager is to arouse 
interest and enthusiasm in the heads of division for the work 
and for better methods of doing the work. The ability to 
do this is one of the most valuable assets of a manager. The 
surest way to accomplish this result is to provide the incentive 
— to make it worth while for the head of division to show 
interest and enthusiasm in the best way to accomplish the 
work of his division. If a manager himself has real enthu- 
siasm, and shows his heads of division that he is not only 
interested in progress, but that he is determined to secure it, 
and that he will reward those who assist him, he will soon 
get from the heads of division interest, and finally enthusiasm. 
Each of these will give much time to study and to investiga- 
tion of better methods for his department, and if led by the 
manager towards functional management and standardization 
great improvements will be made. 

In the advance that has been made in the shops towards 
scientific management, the office must do its part. There 
must be an accurate cost-keeping system which meets the 
requirements of the shop; which not only gives true cost, but 
gives it in such a manner that defects in organization or defects 
in methods will be indicated. All forms and office methods 
should be standardized. The drawing office methods should 
be materially changed. The shop is more dependent on the 
drawing office than on any other department, and in many 
establishments changes can be made in drawing office methods 
which will materially reduce the cost of work in the shops. 

In many establishments the employment of an expert to 
systematize the drawing office, is one of the best moves that 
can be made by the management — even though the expert 
takes a year to do the work and is paid a large fee. The 
drawing offices of American shipyards and Government navy 



THE PRINCIPLES OF SCIENTIFIC MANAGEMENT 167 

yards are, generally speaking, even more badly managed than 
the average jobbing machine shop, and an expert to systema- 
tize the methods in these offices will in a very short time pay 
his salary or fee many times over. 

Let the chief draftsman in each office do a little investi- 
gating, and ask himself a few questions: 

" Are the duties in the office clearly defined, and 
assigned in accordance with the principles of func- 
tional management ? " 

" Are the plans issued to the shops of standard 
sizes, and is a standard arrangement used?" 

" Do the plans clearly indicate the important 
dimensions which must be adhered to? Do they 
show the tolerances allowed? Do they show the 
finish required for every surface?" 

There is a great deal of work done in machine shops, as 
well as other shops, particularly in shipyards, where it makes 
no difference if a dimension varies 1/16" or )/<&", or even 
34 " from that shown on the drawing; there are on the same 
drawing other dimensions which should be exact within a 
hundredth of an inch, or even closer limits. For dimensions 
where extreme accuracy is required, the foremen or assistant 
foremen know the use to which the part is put and will usually 
direct the machinist, but for the general run of dimensions 
the machinist will make them as exact as possible, using a 
metal scale and pair of calipers, while many dimensions will 
be satisfactory if within an eighth or quarter inch of that 
shown on the drawing. This results in many unnecessary 
cuts, loss of time in making measurements, and unnecessarily 
adds to the cost of the work. All important dimensions which 
must be adhered to should be prominently marked, and toler- 
ances given for all dimensions. 

If the drawing office work be studied and analyzed as has 
been done for the work in the shops, there is little doubt 
that as much improvement can be made here as has been made 
in the shops. 



l68 COST KEEPING AND SCIENTIFIC MANAGEMENT 

STORE SYSTEM. 

In many plants the store system is far from satisfactory. 
From the shop point of view there are three important require- 
ments in connection with the store system: 

(i) That ordinary supplies which are regularly required 
shall always be in stock. 

(2) That stores required may be obtained quickly. 

(3) That the planning department shall know each day the 
stores on hand; and that this department in planning 
work shall be able to set aside stores for the job 
planned and have them reserved for the job. 

From the storekeeper's point of view there should be ample 
notice of the probable requirements in order that the stock 
may be maintained. With a planning department which plans 
every job as soon as the order is received and makes complete 
orders of material, there should be no difficulty in keeping 
the store informed of the probable requirements. 

From the storekeeper's point of view there is little need of 
the shop having a daily balance of stores, but if the planning 
is to be done properly and the work carried out as planned 
this must be supplied. This is also of assistance in keeping 
a proper stock of material. The planning department can 
materially aid the storekeeper in this, but to do so it must 
know what is on hand. 

There are very few store departments which meet the essen- 
tial requirements of the shops, and this subject should receive 
more consideration. In a large establishment with work and 
shops covering considerable area there is generally one central 
store; there should be in addition a number of sub-stores 
located in the shops, in order that material which is in con- 
stant use may be quickly obtained. 

It will be profitable to outline the conditions that should 
be met and the service that should be rendered by the store 
department ; then show in detail wherein the store department 
fails and why. An investigation of this kind will clearly 
indicate defects and usually point out the remedy. 



CHAPTER XII 
Methods Which Lead Toward Scientific Management 

An officer in charge of government shops who wishes to 
manage them in the same manner as he would were he in 
commercial life, where the payment or non-payment of divi- 
dends will measure his success or failure as a manager, has 
some difficulties to overcome which are not met elsewhere. 
In the government service the reward for meeting and over- 
coming these difficulties is so meager that few are tempted 
to wage the necessary fight, as such a fight is replete with 
many dangers, and if successful, the reward is little more 
than the self-satisfaction of the knowledge of " duty well 
done." This is one of the important reasons why the results 
obtained in many government shops are not equal to those 
obtained in well-managed commercial establishments. In 
efforts to obtain efficiency in government establishments with 
which I have been connected I have encountered my share of 
the difficulties. This, however, is no place for a description 
of these difficulties, and it will suffice to say that in spite 
of tremendous obstacles the application of the general prin- 
ciples of scientific management to government work has 
wrought improvements and brought results which are far 
beyond expectations. The results obtained, some of which 
will be described in subsequent chapters, justify the belief 
that any manager of a commercial establishment can himself 
apply, without the aid of an expert organizer, the general 
principles of scientific management, and he should obtain 
even greater improvement than the application of these prin- 
ciples brought about in a government establishment. 

There will be for many years, whatever may be the cause, 
establishments where the detail methods advocated for carry- 
ing out the principles of scientific management will not be 

169 



I70 COST KEEPING AND SCIENTIFIC MANAGEMENT 

applied. Methods which have been used in following the 
general principles, without the use of a scientific rate depart- 
ment, should be of assistance to managers who wish to make 
improvements in these directions without outside assistance. 
Each of these managers, when he begins to apply the general 
principles, will see the benefits to be derived from the more 
scientific details, and will realize the need of an expert organ- 
izer to assist him, and he may become impatient with half-way 
measures. This is a good sign; contentment never brings 
progress, and discontent is frequently the forerunner of im- 
provement ; every manager should do the best possible under 
the existing conditions, and an energetic capable manager can 
go alone for a considerable distance on the road to scientific 
methods. 

APPLICATION OF THE GENERAL PRINCIPLES OF SCIENTIFIC 

MANAGEMENT TO NAVY YARD SHOPS. 

The machine shop at the Mare Island Navy Yard was no 
worse than the average Navy Yard shop ; it was, of course, 
below the standard of the average commercial jobbing machine 
shop, yet the faults found can be found in a very large number 
of shops. While government shops leave much to be desired, 
it must be admitted that the government has no monopoly 
of the inefficient establishments. The steps taken to correct 
many of the defects are given in some detail in the descrip- 
tion which follows. 

DETAILS OF SHOP SYSTEM. 

In describing the shop system, little or no claim is made 
for originality. The system is based on the teachings of 
Mr. Fred W. Taylor, in so far as Mr. Taylor's system can 
be applied to a day-work shop, without a rate-making depart- 
ment. 

No attempt is made to give the workmen detailed instruc- 
tion cards describing how each operation is to be performed ; 
the instruction cards only tell the workman definitely what is 
to be accomplished, and he, assisted by the gang boss and 



METHODS TOWARD SCIENTIFIC MANAGEMENT 171 

speed boss, determines the detail methods. It will thus at 
once be seen that important elements of Mr. Taylor's system 
are not undertaken, but it is believed that it is impossible for 
a manager to attempt, himself, to introduce these elements. 

The use of the day-work system was the result of circum- 
stances over which the manager had no control. It was the 
constant aim to get the shops up to maximum efficiency under 
this system and at the same time collect data which will make 
it easy to go to one of the more efficient systems of paying 
labor. If an expert organizer is not to be employed the 
Halsey premium system is undoubtedly the best to use ; when 
a shop has been raised to a high standard under the day-work 
system, it is an easy step to go to the premium system. 

There are a number of general instructions which apply 
to all shops under the one management, and as these have to 
do with the management of the machine shop, the most im- 
portant of these instructions will be given before the machine 
shop instructions are taken up. 

DELIVERY OF PAPERS BETWEEN SHOPS AND OFFICES. 

In many establishments papers are sent from office to office 
by messengers from each office or shop. This method is 
expensive and unsatisfactory. The ideal method so far as 
operation is concerned is the use of pneumatic tubes connect- 
ing all departments, but where the shops and offices are scat- 
tered, the installation of pneumatic tubes will involve a large 
expenditure of money which is not warranted by the results 
obtained. The following simple arrangement has been found 
satisfactory: 

In the main office there is a set of post-office pigeon-holes; 
one for each foreman or shop; one for each officer attached 
to the department, and one for each sub-department in the 
main office, such as drafting room, estimating department, 
requisition office, etc. In each of these offices there are two 
mail baskets, one " out-going," the other " receiving." A boy 
distributes all papers from the main office to the foremen's 
offices and all papers between the foremen's offices. He starts 



172 COST KEEPING AND SCIENTIFIC MANAGEMENT 

his first trip at eight o'clock in the morning, taking all papers 
from the pigeon-holes and putting each shop's papers in a 
separate envelope. These papers are distributed to the various 
shops, being placed in the receiving basket. All " out-going " 
papers are collected and returned to the main office, where 
they are distributed for the next trip, which begins at nine. 
This is continued throughout the day ; a round trip being made 
every hour. The papers for the various officers and sub- 
departments in the main office are distributed from the " post 
office " by the office messenger. 

Soon after this system was put in operation it was found 
that the boy was irregular in the collections. This was cor- 
rected by having him carry a small watchman's clock having 
a key at each point of collection. The dials from the clocks 
are examined each day by the chief clerk. 

RECORDS OF WORKMEN. 

In each shop a record is kept of the mistakes, neglect and 
other offenses of the workmen. A man through carelessness 
makes an error in machining a piece of work which involves 
only a small loss; it is out of the question to suspend or 
discharge him for this, for it may be the only mistake he has 
made in six months. Moreover, severe penalties for errors 
of this kind will make workmen over-careful; they will take 
an unnecessarily long time on their work and run up the 
cost. On the other hand, the man who habitually makes mis- 
takes should be known, and the written record brings this 
out. 

The knowledge among the men that these records are kept 
has a good effect, and when a reduction of the force is neces- 
sary the records are of great assistance in selecting the men 
to be laid off. In a government establishment there can be 
but three punishments : reduction in pay, suspension, and dis- 
charge. These are much too severe for many offenses which 
merit some punishment. 

Fines are perhaps the best punishments for all offenses 
which do not merit discharge. The amount of the fine should 



METHODS TOWARD SCIENTIFIC MANAGEMENT 1 73 

be in accordance with the offense and may range from one 
cent to twenty-five dollars. All fines collected should be re- 
turned to the workmen in some way and should never be 
taken by the company. An excellent way to dispose of fines 
is to give the money collected to the workmen's benevolent in- 
surance fund, if there is one; if not, they should be used in 
some way to benefit the workmen as a whole. 

SHOP ORDERS. 

The type of shop orders, both for output work and expense 
account work, are shown in Fig. 2 and Fig. 3 (Chapter V), 
and require but little explanation. It requires, however, some 
educational work to have the orders properly issued. Some 
trouble was experienced in getting the foreman issuing the 
order to fill in the date on which the work is actually wanted. 

It requires no investigation or thought to fill in " as soon 
as possible " or " immediately," and a great many orders were 
in the beginning made out in this way. The greatest diffi- 
culty, however, was experienced in getting the foreman re- 
ceiving the order to make an intelligent promise. When first 
used it was found that promised dates of completion were, 
in some cases, made without the foreman knowing the work 
to be accomplished, and in nearly all cases were made with 
but little consideration of the job itself, or of other work in 
the shop. 

With a little education and constant watchfulness, this was 
corrected. At present care is taken that the date given on 
which the work should be completed is reasonable, and is the 
time that the work should be delivered, and the promised 
date of completion is only given after the work is carefully 
sized up. If the date is beyond the date on which the work 
is required, the foreman requiring the work is immediately 
telephoned, and, if the question is not satisfactorily arranged, 
it is immediately referred to the shop superintendent. 

A tickler file is kept in each shop of promises made and 
promises due, and failures to keep promises are reported to 
the shop superintendent. 



1/4 COST KEEPING AND SCIENTIFIC MANAGEMENT 



MATERIAL SUPPLY. 

There are two sources of supply of material, the general 
storehouse, which may be some distance from some of the 
shops, and the sub-stores, which are located in tfie shops. In 
the sub-stores there is kept a small supply of materials which 
are constantly required in the shops. The sub-stores are re- 
plenished as necessary from the main store. There must 
be a strict accountability for all stores and the methods fol- 
lowed to secure this end are described in the chapters devoted 
to Cost Keeping. 

Material from the shop stores can be quickly obtained, but 
time is required to obtain material from the general store- 
house. The practice usually followed is to send messengers 
from each shop to the main storehouse for material when re- 
quired, and these messengers often wait for the material and 
carry it to the shop, using a hand cart, or a team. This sys- 
tem is extremely unsatisfactory. 

There should be enough looking ahead to enable material 
to be obtained from the main storehouse in an orderly man- 
ner and at reasonable cost. Requisitions are made on the 
store in triplicate, one copy is retained by the shop for check- 
ing the stores on arrival, and two sent to the storehouse by 
means of the messenger service. The stores are collected and 
deliveries are made to the shops by means of delivery teams 
or by the yard railway service. A competent man is detailed 
as " material man " who sees that deliveries are promptly 
made to the various shops. In some cases material is ur- 
gently required and to obtain it in the regular way will cause 
delay ; in these cases the shops are authorized to attach a 
pink " urgent slip," described later, to the requisition and send 
the requisition to the store by special messenger, and such 
requisitions must receive immediate attention. 



METHODS TOWARD SCIENTIFIC MANAGEMENT 175 

WORK, REPORTS OR REQUISITIONS REQUIRING IMMEDIATE 

ACTION. 

A pink " urgent slip " is used to attach to orders for work, 
requisitions, or other papers when the occasion necessitates 
immediate action. Anyone receiving orders or papers with 
one of these slips attached is required to give the subject im- 
mediate attention and give all such work right of way over 
ordinary work. Anyone using these pink slips must sign 
them, and he is held strictly to account that the work is really 
urgent, for it is realized that if this is not done and the slips 
are used for work that is not urgent the object of the slips 
will be defeated. 

TRANSPORTATION OF MATERIAL FROM SHOP TO SHOP OR FROM 
SHOP TO PLACE OF ERECTION. 

The handling of material from shop to shop, or from shop 
to place of erection, is a subject which receives far too little 
attention. In large establishments where there are a number 
of shops, more or less separated, the cost of handling the 
material may be more than the cost of the shop work. In 
almost any establishment a thorough study of the subject, 
and systematization of methods, will result in marked reduc- 
tions in cost; these reductions will be made not only for 
the work itself, but savings will be effected by eliminating 
unnecessary delays which exist. 

In many large establishments, particularly shipyards and 
navy yards, there are no standard methods for handling work 
from shop to shop. In many cases work done in one shop for 
another may be delayed several days after completion or may 
even remain in the shop until sent for by the shop requiring 
the work. It is not unusual to see helpers and laborers carry- 
ing material from shop to shop; in many cases mechanics, 
assisted by helpers, carry work from the shop to place of 
erection ; in some large establishments hand carts pushed by 
laborers or helpers are the usual means of transportation of 
all but heavy articles. It is hardly necessary to point out 



I76 COST KEEPING AND SCIENTIFIC MANAGEMENT 

that these methods are uneconomical in the extreme, or that 
very little investigation and study can effect great improve- 
ment. 

In large establishments where shops are scattered, as in a 
shipyard, it will pay well to handle all material between shops, 
from storehouse to shops, and from shops to place of erection, 
by means of a plant railway system. A discussion of this 
important subject is not within the scope of this work, but a 
few suggestions can be offered. 

In nearly all establishments it will be difficult or even im- 
possible to use the standard gauge for this purpose, on account 
of short curves which are necessary to reach many shops. 
The use of the narrow gauge on the other hand, makes it 
impossible to receive or ship direct from the shops by standard 
railway equipment, unless there is also a standard gauge track 
reaching to all parts of the plant; this duplication of track 
equipment is undesirable. It will usually be found, however, 
that the amount of standard track required to reach the im- 
portant receiving and shipping points and for the locomotive 
cranes is not great. 

The best arrangement will usually be a narrow gauge sys- 
tem reaching to all parts of the plant, and a limited amount 
of standard track reaching the principal receiving and shipping 
points, and standard track for the use of locomotive cranes. 
In some of the most efficient establishments in the country, 
which have a great deal of standard trackage, a complete 
narrow gauge equipment has been installed, and the manage- 
ment considers both systems necessary to efficiently handle 
the large output, which varies from small weights of a few 
hundred pounds, to those of many tons. 

With a railway equipment of this kind a railway freight 
service should be established, and hourly trips can be made, 
though trips made every two hours will give far better service 
than is now obtained in the great majority of plants. When 
such a service has been established it will be necessary to pro- 
hibit material being transported on men's backs or by hand 
carts, for, strange as it may seem, there will be found many 



METHODS TOWARD SCIENTIFIC MANAGEMENT 177 

foremen and workmen who maintain that transportation in 
this manner is necessary to avoid delay. No doubt it is, with 
foremen who cannot look ahead two hours, or even one hour, 
and in every case of so-called " urgency " that I have investi- 
gated it was found that the urgency was caused by neglect of 
foremen or assistant foremen. 

The transportation question is one of great importance, and 
the methods to be followed should not be settled until a search- 
ing investigation has been made of conditions and the require- 
ments, and then the scheme should be planned in all of its de- 
tails. 

Some years ago I became impressed with the importance 
of this subject, and undertook to improve the transportation 
methods at the Mare Island Navy Yard. Like many other 
managers, I did not have the equipment which was required, 
and had to make the most of resources available. At this 
yard there was standard gauge track reaching the important 
parts of the yard, but the track was in such poor condition 
that the necessary speed for a regular service could not be 
maintained, and there was not sufficient rolling equipment for 
this service. The use of the railway equipment was confined 
to handling material in carload lots, and the use of several 
locomotive cranes for handling heavy weights. 

A regular team service was organized for handling all light 
material between shops and between storehouse and shops, 
and also between the shops and ships along the water front. 

In each shop a receiving and dispatching space was laid out 
and marked. The dispatching space has two divisions, one 
for work which has been completed, but not tagged for ship- 
ment, and another for articles ready for shipment. As soon 
as work is completed it must be immediately placed in the 
space for completed articles, and necessarily shipment promptly 
follows. This method insures prompt handling of work from 
shop to shop. Articles must remain in the receiving space 
until the planning department receives notification of arrival 
and routes the work to the machines. After this system was 
well organized the use of hand carts, or men carrying work 



1/8 COST KEEPING AND SCIENTIFIC MANAGEMENT 

from shop to shop was prohibited, except in urgent cases. 
In such cases the foremen were authorized to use these meth- 
ods but were required to submit to the shop superintendent a 
written explanation of the necessity for this action. 

These methods were a great improvement and resulted in a 
large reduction in the cost, and also elimination of delays in 
work going through the shops. The same system was after- 
wards employed in other large navy yards with equally satis- 
factory results. Later the railroad tracks were improved, 
and additional equipment secured. The team service was then 
abandoned and replaced by a railway freight service on regu- 
lar schedule. This service was very satisfactory and eco- 
nomical. 

At Mare Island the shops are widely separated, and in gen- 
eral are on streets nearly parallel to a straight water front. 
The wide gauge tracks, while not entirely satisfactory, reach 
all of the important shops, and pass the others near at hand. 
It is, however, impossible to enter some of the shops on ac- 
count of short curves. There are very few plants which will 
be found as well adapted to the wide tracks as the Mare Island 
plant. In the great majority of plants the narrow gauge 
system is necessary if material is to be efficiently handled in 
this manner. 

CENTRAL TOOL-GRINDING AND -ISSUE ROOM. 

A central grinding and issue room was established in one 
of the machine shops. The grinding machines were concen- 
trated in this room and all tool grinding, with a few excep- 
tions was done by this department. In the illustration, Fig. 
16, there is shown a part of the central grinding room; the 
central tool issue room is adjacent. 

The grinding room was placed in general charge of the 
head toolmaker, but was in direct charge of a young ambitious 
helper who had been trained for the work. All of the opera- 
tors in the grinding room were trained helpers, and these 
did practically all of the grinding, it being seldom necessary 
to detail a tool room hand for special or difficult grinding. 



METHODS TOWARD SCIENTIFIC MANAGEMENT 



<79 



Adjacent to the grinding room a central tool issuing room 
was established. Each shop sends every day to the central 
issue room a box containing its dulled tools ; these tools, ex- 
cept specials, are immediately replaced by sharp tools from 
the issue room and the box returned, a note being made on the 
tool shipment sheet of the tools not returned. Tools are 
assembled by classes, and ground in quantities, but special 
tools received from shops have right-of-way over stock grind- 




Fig. 16. Part of Central Tool Grinding Room, Mare Island Navy 
Yard. Central issue room is immediately adjacent. 

ing and are promptly reground and returned to the shop from 
which received. 

Each workman keeps a daily record of the tools he grinds ; 
at the end of the week a summary is made of the week's 
work and the cost per tool for each workman, and this report 
is submitted to the shop superintendent. Very satisfactory 
work and a very high output for day work are obtained by 
these methods. 

The tools ground in the central plant are for the following 
shops or departments : Tools for shipfitter's department, 



l8o COST KEEPING AND SCIENTIFIC MANAGEMENT 

consisting of chisels, drills, countersinks, reamers, punches, 
shear blades, etc. ; for a large iron worker's department ; all 
tools for three machine shops ; a large electric shop ; a large 
boiler shop; and a large blacksmith -shop. The tools for the 
woodworking shops do not go to the central grinding room, 
but are ground in these shops by the machine hands. 

WEEKLY CONFERENCE OF HEADS OF DEPARTMENTS AND 
FOREMEN. 

Each head of department meets the foremen once a week 
at a regular time. At these conferences the work in progress, 
proposed improvements, and the policies of the management 
are freely discussed. The manager frequently attends these 
meetings. The procedure at these meetings is as follows: 

(i) Work in Progress. Under this head is discussed the 
time of completion desired on the various work under way, 
whether more men should be taken on or drawn from work 
that can wait, why the progress on certain work is slow, the 
difficulties encountered, etc., in other words, a full discussion 
of current work. It is my experience that, when foremen 
are taken to task for delays, it is always the " other fellow " — 
he couldn't get his work out of the smith shop, or the foundry ; 
or the machine shop did not do the work properly, or the 
laborer did not get the crane or furnish transportation in 
time; or some other excuse of this kind. When these sub- 
jects are taken up in the presence of all the foremen the ex- 
cuse of the " other fellow " is not so frequent. If it is the 
" other fellow " who is to blame it is brought out in a free 
discussion of this kind. At this meeting the head of the de- 
partment settles all of these differences and lays out the im- 
mediate work as he wishes it done. Every foreman fully un- 
derstands his wishes and directions, and has no excuse if he 
does not work with the others to the desired end. 

(2) Suggestions front the Foremen. After the current 
work discussion, each foreman is asked in turn for sugges- 
tions as to improvements, either of facilities or methods. 
Every suggestion is fully discussed, even though the sugges- 



METHODS TOWARD SCIENTIFIC MANAGEMENT l8l 

tion may at once appear to the head of the department as 
valueless, and all foremen are invited to advance their ideas 
on the subject though it may not affect their departments. 
Some suggestions are adopted at once; others are rejected; 
some require further investigation. 

(3) Suggestions from the Department Head. After all 
suggestions from the foremen have been discussed, the head 
of the department takes up his suggestions. It is my practice 
to make notes during the week of the subjects to bring up 
at the next conference. In addition to the discussion of cur- 
rent work and general improvements in appliances or methods 
it is my practice at these conferences to point out the weak- 
nesses of the various shops — not only those discovered in the 
usual rounds of inspection, but to take each shop in turn week 
by week and make a diligent hunt for the uneconomical meth- 
ods. At the next meeting these are all brought out and fre- 
quently samples of the work illustrating the uneconomical 
methods are exhibited. 

There are some who will question the advisability of bring- 
ing up these weaknesses in this manner at the general, meeting, 
and will say that the same results can be obtained by calling 
the foreman of the shop and going over these subjects with 
him alone, and that a foreman resents a public demonstration 
of this kind. 

I use a public demonstration of this kind as an object lesson 
to all. I want each foreman to know that I am hunting for all 
uneconomical methods. I demand that they do the same. 
I want each foreman to think for himself " How can I save 
money on this job? " No doubt the foreman does resent the 
public demonstration, but he will try to see that there are no 
more public demonstrations of his shop. 

After the meeting is over a stenographer is called and the 
necessary instructions are given on all matters settled and a 
record on cards is made of all unfinished work; these cards 
are brought up at subsequent meetings. 

I attach great importance to these conferences, and am sat- 
isfied that much progress is made by means of them. 



l82 COST KEEPING AND SCIENTIFIC MANAGEMENT 

DAILY CONFERENCE OF MANAGER AND HEADS OF DEPART- 
MENTS. 

There is a short daily conference of the manager and the 
heads of departments. This conference begins at 4:15 p. m., 
and should not last later than 5 p. m. A manager may, several 
times during each day, wish to discuss subjects with heads of 
divisions. In a great many cases the question is not of im- 
mediate importance and can readily be deferred a few hours ; 
these questions frequently also interest more than one head 
of department. Many managers send for heads of depart- 
ments every time a subject comes to their minds which they 
wish to discuss, and often a head of department is sent for 
three or four times a day. Usually he must go, no matter on 
what work he may be engaged ; this breaks in on his work, and 
but few managers realize how much this interferes with the 
work of a head of a department and those under him. The 
various heads of division also frequently wish to discuss 
routine matters with the manager ; every manager must be ac- 
cessible to these heads, yet these frequent calls interfere with 
his work, and prevent concentrated thought. 

There is a great deal of time lost from these two causes, 
and they are also wearing on the nerves of both the manager 
and his heads of division. All of this can be avoided with 
the daily meeting. 

During the day when I wish to send for a head of division, 
I ask myself if the question cannot wait until the afternoon 
meeting, and in nine cases out of ten it can; if it can, a note 
is made of the subject so that it will not be overlooked at 
the meeting. The heads of division do the same; if the ques- 
tion should be brought to the immediate attention of the man- 
ager, the head of division goes to him, otherwise he makes a 
note of the subject to bring up at the afternoon meeting. 

At this meeting the manager and heads of department have 
memoranda of the subjects they wish to discuss. The work 
in progress, anticipated delays, etc., are gone over, and the 
manager informs his assistants of any change in policies. 



METHODS TOWARD SCIENTIFIC MANAGEMENT 183 

There is a tendency for these meetings to lengthen out ; heads 
of departments will bring up subjects which may require long 
explanations; these should be eliminated from the general 
meeting; everything should be cut short and if much consid- 
eration of a subject is required all concerned should note it 
as unfinished business and take it up for consideration sepa- 
rately, and then bring it before the next meeting. In practice 
I have found it desirable to limit the time of the daily meet- 
ings to forty-five minutes. 



CHAPTER XIII 
Machine Shop Methods 

general instructions. 

The planning department, under the general direction of the 
Master Machinist, will control and direct all work done in 
the machine shop. All orders for work will go to the plan- 
ning department, via the Master Machinist; this department 
will separate the orders into the various classes, viz. : urgent 
orders, routine orders, manufacturing orders, plant repair or- 
ders, etc. The planning department will analyze these and 
lay out their future course. It will be the aim of the planning 
department to accomplish the following: 

First: — A careful analysis of the work to determine ex- 
actly what is to be done. 

Second: — The determination of the best way to accom- 
plish the work in the quickest time at the lowest cost. 

Third: — The employment of the best machines, best facili- 
ties, and the best men available to carry out the work 
in the best way as previously determined. 

The instructions of the planning department are supreme 
in designating the machine on which the work is to be per- 
formed, and the route that the work shall follow, and no 
change will be made without the consent of the planning de- 
partment. The gang bosses and speed bosses are invited to 
offer suggestions to the planning department if in their opinion 
the methods prescribed can be improved, but under no cir- 
cumstances is any change to be made unless such change is 
made by the planning department and shown on the route 
sheet and instruction cards. 

All castings, forgings, material, work from other shops, 

184 



MACHINE SHOP METHODS 1 85 

and work from the ships received in the shop, must be de- 
posited in the receiving space and received by the receiving 
clerk, who will record the arrival, and will report same to 
the inspector, and after inspection will report to the planning 
department. 

Work received from the outside machinist force must 
bear tags identifying the work, stating the requirements 
and giving the date on which the work is wanted ; for work re- 
ceived from other shops the necessary information is given on 
the shop orders sent direct to the planning department. 

All work spoiled, mistakes made, and damage to machinery 
or appliances must be reported to the planning department 
on damage report forms in accordance with detail instructions 
for making these reports. These reports, with report of inves- 
tigation, will be forwarded to the shop superintendent. 

In case tools ordered for a job are not satisfactory, or 
the condition of a machine is not satisfactory, or belts are not 
in good condition, or if there are any other conditions which 
will interfere with carrying out expeditiously the work called 
for on the instruction cards, the workman discovering the 
same shall immediately report to the gang boss or speed boss, 
whichever is in charge of that part of the work, and the latter 
shall immediately bring this to the attention of the planning 
department for correction. As long as reports are not made 
by the workmen it will be assumed that standard conditions 
prevail, and excuses for unsatisfactory output will not be ac- 
cepted. 

When a new standard pattern is made, one piece will be cast 
and machined to completion under the direct supervision of 
a representative of the planning department, who will deter- 
mine if the pattern is entirely satisfactory; too much stock for 
finishing is a usual fault, and careful attention should be given 
this subject, as all unnecessary finish must be eliminated. If 
changes are required, the patternmaker will be called for con- 
sultation, and the necessary changes ordered. When the pat- 
tern is satisfactory the pattern shop will be notified. Defects 
in castings caused by faulty patterns, in other than standard 



l86 COST KEEPING AND SCIENTIFIC MANAGEMENT 

patterns, will be reported to the shop superintendent by the 
planning department. 

The planning department will control all drawings issued 
from the drawing office to the shop, and will issue by checks 
the same to workmen. Any errors discovered in drawings, 
or improvements suggested, should be reported to the planning 
department by the mechanic, outside quarterman or leading- 
man, gang boss or speed boss, and that department will fully 
investigate the subject and make a report to the drawing of- 
fice, in accordance with standard instructions regarding cor- 
rections to drawings. 

The planning department will control and issue all shop 
orders in accordance with standard instructions. Care will 
be exercised in making promises of dates of completion to 
other shops that the promises can be kept. When it does not 
appear possible to complete work on the date required by 
another shop, the subject must be taken up immediately with 
the foremen of the shop requiring the work, and if the re- 
quirement cannot be changed to one which the machine shop 
can meet, immediate report must be made to the shop super- 
intendent and instructions requested. The planning depart- 
ment will report to the shop superintendent failures of other 
shops to keep promises. 

There will be kept in the planning department a tickler 
blackboard; on this, under the head of "to-day's important 
business," will be given the work due other shops or divisions 
on that date, and all promises made by other shops to the 
machine shop which fall due on that date, and all important 
matters which must receive attention. On this board will also 
be shown, under the heading " Black List " all delinquencies in 
promises. Each day at four o'clock the data will be collected 
from the tickler files and the reports of work received and 
work completed, and the next day's important business and the 
delinquencies will be posted on the board. A delinquent no- 
tice will be sent to shops or divisions which have failed to keep 
promises, and a summary report of all delinquencies will be 
made to the shop superintendent. 



MACHINE SHOP METHODS 187 

The planning department will prepare and issue detailed 
written instructions of the duties of tool room keepers, topi 
delivery boys, move-men, cranemen, sweepers, and others who 
have general duties of this kind to perform. In each case 
these instructions must specify in detail the work to be done, 
and as far as possible must prescribe a daily task for each 
man. 

PLANNING DEPARTMENT AND SHOP STAFF. 

Chief Planner. It will be his duty to personally study all 
orders received and familiarize himself with the requirements 
of each job. He will first determine if there is sufficient in- 
formation available to carry the work to completion, and if 
not he will take steps to secure the necessary information. If 
drawings or sketches are required he will notify the drafting 
office, and send a duplicate to the shop superintendent. If 
a manufacture order gives specifications or is " per sample," 
and drawings are not required, but the specifications are not 
complete or the sample has not been received, the planner will 
immediately notify the Assistant Shop Superintendent who 
has charge of this work, who will obtain the necessary infor- 
mation. 

At the navy yard there is a large amount of work of this 
character; ships both at the yard and away from the yard 
make requisitions to replace broken or worn-out parts, and it 
is not unusual to have on hand at one time 500 orders of this 
kind, which call for parts from the smallest, as a small special 
bolt weighing an ounce, to a defective gear which may weigh 
a ton. Until there is more standardization in ships built by 
different ship builders it will not be practicable to have draw- 
ings of the thousands of small parts. Ship officers in mak- 
ing requisition for these parts usually furnish a sketch or send 
a sample which is sent to the shop, but very frequently the in- 
formation furnished is incomplete and this should be discov- 
ered immediately after the order is received. 

With the, necessary information available, the planner will 
determine the operations necessary and will enter these on the 



1 88 COST KEEPING AND SCIENTIFIC MANAGEMENT 

route sheet (in duplicate), Fig. 17. Under the column head- 
ing " machine " will be given the type of machine on which 
the operation is to be performed but the number of the ma- 
chine will not be entered at this time. It is impossible at this 
time to tell when the work will be undertaken and consequently 
the work cannot now be routed to the best advantage to the ex- 
act machine. 

He will prepare the shop orders for castings (via pattern- 
maker), forgings, or work that may be required from other 
shops, but will not now enter dates on which work is required. 
The route sheet and shop orders are turned over to the " ma- 
terial man " referred to in a subsequent paragraph, and he 
ascertains the date that material can be obtained and informs 
the head planner. 

The planner, with the information available and general 
knowledge of the work required in other shops, and the time 
required to do the work, but in doubtful cases in consultation 
with the foremen of other shops, ascertains if the work as a 
whole can be completed on the date given either on the order 
or in special bulletins. If not, he must immediately notify 
the shop superintendent by telephone, and explain the reasons, 
and obtain instructions. 

If the work can be completed in the time required, the plan- 
ner must determine the date on which material must be de- 
livered and dates on which castings, forgings or work from 
other shops must be received to enable the work in the ma- 
chine shop to be accomplished and the work as a whole com- 
pleted within the required time. He now inserts these dates 
on the shop orders, and enters under the heading " Schedule 
of Material Ordered " on the route sheet, Fig. 17, a summary 
of these orders. The description of the completion of the or- 
ders, preparation of instruction cards and entries on route 
sheet, and the filing of this sheet are given in subsequent para- 
graphs which describe the duties of other members of the 
planning stafT. 

When material, castings, forgings, etc., have been received 
in the shop, to justify beginning the work, the planner will 



MACHINE SHOP METHODS 



189 




190 COST KEEPING AND SCIENTIFIC MANAGEMENT 

take the route sheet with accompanying instruction cards from 
the file, and consulting the order-of-work board, which shows 
the status of work in the shop, will route the work to the ma- 
chines to the best advantage, and he will then turn over the 
route sheet, with the instruction cards, .and standing order 
slips, to the " standing-order-board man " to put the work in 
progress. 

The chief planner must keep track of the progress of the 
work, and take the necessary steps to make good any delays 
which may occur in the program as planned. He must keep 
the shop superintendent informed of all delays. The shop 
superintendent will depend on him to get the work through 
the shop in stipulated time, and if the planner anticipates that 
the ultimate completion of the work will be delayed he should 
promptly notify the superintendent. 

Each day at four o'clock, from the ticklers, reports of 
receipt of material and work from other shops, reports of com- 
pleted work, he will make the reports of delinquencies, and will 
post the " Important Business Board " for the following day. 
The " Important Business Board " for one of the shops is 
shown in the illustration, Fig. 18. 

The chief planner will prepare and issue detailed written 
instructions of the duties of tool room keepers, tool delivery 
boys, move men, crane men, sweepers, and others who have 
general duties of this kind to perform. In all cases possible 
he will prescribe for each man a daily task. 

The chief planner will visit the shop as often as possible 
and at least twice each day, to observe the progress of work, 
and to consult with the gang bosses and speed bosses; these 
bosses should be encouraged to make suggestions regarding 
routing work. 

The chief planner will train a man selected by the Master 
Machinist to perform the duties of chief planner. When the 
quantity of work in the shop warrants, this man will be de- 
tailed to assist the planner and during the absence of the latter 
will take up his work. 

Material Man. The material man will be in charge of the 



MACHINE SHOP METHODS 



I 9 I 




u 

< . 

« w 









o w 

W « 

o 

Q 2 

« w 

O 

PQ * 



PQ £2 

H O 



192 COST KEEPING AND SCIENTIFIC MANAGEMENT 

shop store. When the work in the shop warrants, the fore- 
man will assign an intelligent laborer to assist him. The ma- 
terial man will keep a record of issues of material to the va- 
rious jobs, will keep up the stock, and make returns to the 
main storehouse in accordance with standard instructions. The 
material man will obtain information regarding material on 
hand, dates when material required by purchase can be ob- 
tained, and delays in delivery. He will keep the chief planner 
informed of these conditions. 

When the route sheets have been obtained from the chief 
planner, he will, after receiving instructions from the chief 
planner of the kind and quantity of material required, obtain 
information from the storehouse and other shops of the 
amount of material on hand, and if additional material is 
needed, will obtain information of dates when this can be 
obtained by purchase, and he will give this information to 
the chief planner. After the latter has decided the date on 
which the material is required, he will make the requisition 
for the material (as per standard instructions) specifying the 
dates on which it is required. He will record on the route 
sheet, Fig. 17, under the heading " Schedule of Material Or- 
dered," a summary of the material ordered. When ma- 
terial is reported received, he will check it against the re- 
tained copy of the requisition, will tag it with the name and 
number of the job, and will have the material stored until 
used. He will enter on the route sheets the dates on which 
the material is received. 

He will teach the man detailed to assist him the duties of 
material man, in order that he may be able to perform the du- 
ties during the absence of the material man. 

Instruction Card Man. It is the duty of the instruction 
card man to prepare the written instruction cards issued to 
the workmen. These cards tell the workmen and shop bosses 
what is to be accomplished at a machine or a bench and the 
machine or bench to which the work is to be moved for the 
next operation. On the instruction card will also be placed 
the order number to which the work is to be charged, the gen- 



MACHINE SHOP METHODS I93 

eral and detail drawing to be followed, or sample to be fol- 
lowed, and special tools or jigs that will be used. If special 
instructions are to be given a workman the instruction card 
will specify the man who is to give the instructions. When 
the premium system or piece-work system is employed, the 
standard times or piece rates will also be given. 

The route sheet with the operations given is passed from 
the head planner to the instruction card man, who prepares 
the instruction cards for the job. He will, from the card 
index of jigs and special tools on hand, determine if any are 
suitable for the job and if so specify them on the cards. He 
will determine if new special tools or jigs appear to be war- 
ranted, and in this connection will consult the head toolmaker ; 
if in his judgment additional tools are warranted he will pre- 
pare an estimate of the cost of these tools, and submit a re- 
port to the master machinist, giving savings that will be made 
by the tools and their estimated cost. If the tools are author- 
ized by the master machinist or shop superintendent regular 
orders will be issued for the manufacture and the instruction 
card man notified, and these tools will be specified on the in- 
struction card. 

The instruction card man will prepare the standing-order 
slips, which are briefs of the instruction cards and which are 
to be placed on the standing-order board. A sample instruc- 
tion card is shown in Fig. 19, and a sample standing-order 
slip in Fig. 20. The instruction cards and standing-order slips 
will be placed in the envelope on the back of the original route 
sheet, and the whole turned over to the " standing-order-board 
man." 

The instruction-card man will visit the shop as often as pos- 
sible, and not less than twice a day, to observe the progress 
of work in machines, the use of the tools, and to consult with 
the speed and gang bosses. He will encourage suggestions 
from these bosses. 

It will be the duty of the instruction-card man to make to the 
master machinist recommendations for the purchase or man- 
ufacture of new tools for machines, jigs, dies, etc.; the head 



194 COST KEEPING AND SCIENTIFIC MANAGEMENT 

toolmaker will therefore submit his recommendations on this 
subject to the instruction-card man. 

The instruction-card man will train a man selected by the 
master machinist to perform the duties of instruction-card 



O. K'dJZ/2&„& B. J. O. Wo.tfeo.7Z/Gy9 Issued...#..T/£! ...By. .*#*£.£? 

Complete £y , , ^ p- 

Work assigned at...Z./#... M &..ri7.. By....<^R£y^. Gang boss 

Machine set and work accepted by.. Afu/F.^^y... Speed Ijoss, at/£?..«4.M..-^r.T./'7' 

Work completed atV/.A.M ^r.-/<5...By check N o„ Zg l3ijr 

Item ?^C^.:r.7-^£^....C<?^^ 



The following work will be completed at YAj£&./fc£ 3* 
Upon completion will be moved \o.Jrf A .iS0*..2 
Detail instructions: 

7ZM/rrjtv....yA£*/j3t£L.. . : 3r ....<&4*.^j^^ 

<Z.au*tr77A?.crr ....\Mr3rrt...L<rifia>&£!te.<ji&ajit!*r.T: 



o«casjey.G&y "?&.** *..* 



~. Estimated time _ 

, Refer to plan No V^C. Actual i\mt./jQ.jf.&.*. 



Fig. 19. Machine Shop Instruction Card. 



MFG. DRPT 614 

STANDING ORDER 

J. O. No.-^Z£— * 

Machine No. A£.^ ?ft«g , " Date , ^- ~ ' C* i«K^ 

Name of Piece and Operation ^ ^ g <^ ^" TL& _ WjO>SL4-_ 2^z 



Strife s *-5*/<2^ - ~7Z/p>/v CasTr/o^erT^ 



Fig. 20. Standing Order Slips. These are placed on the standing 

order boards. 

man. When the quantity of work in the shop warrants, this 
man will be detailed to assist the instruction-card man and in 
the absence of the latter will take up his work. 



MACHINE SHOP METHODS 195 

Standing-Order-Board Man. It is the duty of the board 
man to attend the standing order board, the tickler files for 
work promised, and to see that the " move man " promptly 
moves completed work from a machine to- the place for the 
next operation. When he receives the route sheets, he will 
file by job order numbers the originals which are accompanied 
by the instruction cards and standing-order slips; the dupli- 
cates will be placed in a tickler file by dates on which the work 
in the machine shop should begin. He will keep the chief 
planner informed of work due in the shop and not received. 
When the necessary castings, forgings, and other material 
necessary to proceed with work is in the shop he will inform 
the chief planner and after the latter has indicated on the 
route sheet the number of the machine or bench for each 
operation, the board man will mark these numbers on the 
instruction cards and standing-order slips, and will issue the 
instruction cards to the workmen and place the standing-order 
slips on the board. It is the duty of the board man to see 
that the standing-order slips on the boards correctly repre- 
sent the location of the work in the shop ; it is his duty to re- 
cord on the route sheet in the columns " Ordered to Ma- 
chine " and " Operation Completed " the progress of the 
work. 

The board man must instruct an understudy selected by the 
master machinist, who will perform the duties in the absence 
of the board man. 

Shop Clerk. The shop clerk will keep a card record of the 
workmen, date of employment, rate of pay, promotions, re- 
ductions, home address, when disciplined, record of absences, 
breakage of tools, and from information supplied by the master 
machinist notes regarding each man's ability. 

He will have charge of filing and indexing all drawings and 
the issue of plans to the workmen. He will have charge of 
all office correspondence and must keep it indexed. He will 
receipt for job orders, and after they have been noted and 
initialed by the master machinist will file them in the job order 
file ; he will file shop orders ; he must keep the files " Work in 



196 COST KEEPING AND SCIENTIFIC MANAGEMENT 

Progress " and " Work Waiting " to correctly show the status 
of the work. 

He will receive daily the time tickets of the men and after 
checking these to see that they have been passed by the gang 
bosses, will arrange them by job numbers and send them to 
the main office. 

He will do all clerical work as directed by the main office 
and the master machinist. 

He will be present at the check board at each muster, and 
will make a report to the main office of the men not muster- 
ing. 

He will instruct an understudy selected by the master ma- 
chinist, who will perform the duties in the absence of the 
clerk. 

Time-Study Man. The time-study man will be assigned his 
work by the master machinist and the shop superintendent. 
He will make time studies of work on various machines to 
determine defects in methods and equipment. Until methods 
are standardized he will work with assistants of the shop super- 
intendent detailed to the various shop investigations. After 
methods are standardized the time-study man will make unit 
time studies of the various operations, to determine the 
standard time for each operation. 

The Foreman. The master machinist will be the exception 
man. Much of the detail work which a foreman is usually 
expected to look after has been assigned to the planning room 
staff; this gives the master machinist the time to look after the 
big things, to properly deal with the exceptions brought to his 
attention, and to study his men, particularly those in super- 
visory positions. 

At first his time will be taken up with coordinating the va- 
rious functional foremen, and smoothing out the difficulties. 
When the system is in good working order, and each man 
knows his duties, the friction and many of the difficulties will 
disappear. He will then have only the exceptions brought 
to "his attention, and will have time to study the big things in 
the shop and study the men. The study of the men is a most 



MACHINE SHOP METHODS l[)/ 

important part of his duty; it is difficult to find satisfactory 
men for the various functional duties, and the best men avail- 
able must be secured. 

As a matter of fact, the various positions are less difficult 
to fill than the positions of the old-time gang bosses or as- 
sistant foremen, who had a little of all the duties of the va- 
rious functional foremen; but there is this difference, the 
old-time gang bosses or assistant foremen did not do the work 
they were supposed to do, nor could they do it, but this did 
not show up and no one was the wiser; but with the new 
system it immediately shows if a man fails to do the work 
assigned him. The difficulty of obtaining men to satisfac- 
torily fill the functional positions is excellent proof of defects 
of the old system; men who were looked upon as satisfactory 
assistant foremen and who were supposed to look out for 
work now assigned to several men, fail utterly when defi- 
nitely assigned to one of the many jobs that they previously 
had. 

The foreman must study the men well, so as to obtain the 
very best man available for each position. This is of ad- 
vantage in two ways ; it not only gives the best man for the 
place, but it also shows the men in the shop that a deserving 
man will be promoted, and in many shops this will bring to 
life ambition almost dead, while in all shops it will spur many 
men on to do their very best. 

He will be the disciplinarian of the shop; he must see that 
every man receives exact justice; his success in performing 
this duty will have a great influence in making the operations 
of the shop successful. 

In an establishment known to the writer, it was the prac- 
tice to hunt for the deserving men so as to advance them; 
it was the practice to hunt for men who were trying to better 
themselves, to assist them; it was the practice to advance the 
young men if they could produce the results; results were 
required and if obtained those responsible were rewarded. 
The result was that many men in the shops gave much time 
outside of working hours to study; every evening the public 



I98 COST KEEPING AND SCIENTIFIC MANAGEMENT 

library was crowded with men from this place seeking knowl- 
edge. The management changed and there was not the seek- 
ing for the best men on the part of the management — very 
little time was given to the study of the men. In a few 
months there was little study outside of working hours and the 
public library was deserted in the evenings when before it had 
been well patronized by men from this establishment. 

Gang Boss. The gang boss has charge of the preparation 
of all work up to the time that the piece is set in the ma- 
chine. It is his duty to see that every man has at all times 
at least one piece of work at his machine, with all the jigs, 
templets, drawings, driving mechanism, sling chains, tools, 
etc., ready to go into his machine as soon as the piece he is 
actually working on is completed. The gang boss must show 
his men how to set their work in their machines in the quick- 
est time and see that they do it. He is responsible for the 
work being accurately and quickly set, and should be not only 
able, but willing to pitch in himself, and show the men how 
to set the work in record time. After this is done he will 
turn the machine and workman over to the speed boss, who 
can refuse to accept the job if he is not satisfied with the 
conditions; if the job is accepted by the speed boss, he is 
wholly responsible for future results. As soon as the ma- 
chining is completed, the job reverts to the gang boss, who 
is responsible for taking the work out of the machine and 
for moving work from one place to another, according to 
routine instructions. The gang boss is responsible for order 
and the observance of shop rules. 

Speed Boss. The speed boss must see that the proper cut- 
ting tools are used for each piece of work; that the work is 
properly driven; that the cuts are started in the right parts 
of the piece, and that the best speeds and feeds and depths 
of cut are used. This work begins only after the piece is 
in the machine and ends when the actual machining ends. 
The speed boss must not only advise his men how to best do 
this work, but he must see that they do it in the quickest time, 
and that they use the speeds and feeds and depth of cut as 



MACHINE SHOP METHODS 1 99 

directed on the standard sheets. In many cases he is called 
upon to demonstrate that the work can be done in the speci- 
fied time by doing it himself in the presence of his men. He 
is also responsible for floor work and vise work after the 
gang boss has provided tools, drawings, etc., in the same 
manner as described for machine work. He is solely re- 
sponsible for the quality and quantity of work turned out. 
He will properly instruct the workman whenever such in- 
struction is necessary. 

Inspector. The inspector will inspect all work received 
from other shops, and no work will be removed from the 
receiving floor until inspected and the receiving clerk notified. 
He will inspect work after each operation and if satisfactory 
will O. K. the instruction card. In manufacture work where 
a number of pieces are to be made, he will inspect the first 
piece for each operation, and if correct, will mark the piece 
for identification and return it to the workman as a sample 
by which to finish the remainder of the lot. 

He will inspect the first piece manufactured from a new 
standard pattern, and will consult the gang boss and speed 
boss regarding difficulties encountered, and will report to 
the chief planner whether or not the pattern is satisfactory. 

Move Man. He will move work to the place designated 
on the instruction card for the next operation. No work 
will be moved unless the instruction card bears the O. K. of 
the inspector. After the work has been moved the move man 
will initial the instruction card and turn it in to the standing 
order-board man. 

Head Toolmaker. The head toolmaker, acting under in- 
structions from the planning department, will provide the 
machines with the best tools, jigs and appliances. It will 
be his duty, in cooperation with the instruction-card man, to 
make a special study of all duplication work, so as to provide 
such special tools and jigs as the work will warrant. He 
will submit lists of tools required to the instruction-card man 
for the approval of the master machinist and superintendent. 
All special tools when manufactured, tested and found satis- 



200 COST KEEPING AND SCIENTIFIC MANAGEMENT 

factory will be reported to the instruction-card man to be 
entered on his card index of special tools and jigs, in order 
that they may be utilized on future work. 

The head toolmaker will be in charge of the tool rooms, 
and all machine tools in the shops, and it will be his duty 
to see that all machines and tools are kept in the highest state 
of efficiency. He will have as assistants, in addition to the 
regular tool-room force, a repair man and a belt man, whose 
duties are described in the following paragraphs. 

Repair Man. It is his duty to see that each workman keeps 
his machine clean, free from rust, and that he oils and treats 
is properly. He will see that a damage report is submitted 
for any damage to a machine other than fair wear and tear, 
in accordance with the instructions for making damage re- 
ports. He will see that all standards established for the care 
and maintenance of machines and their accessories are rigidly 
maintained. He will see that the tool lists on lockers at 
machines are kept up to date, and that such lists are accurate 
inventories of the tools and appliances supplied the machines. 
When a key of a locker is turned in, owing to a workman 
being shifted from the machine, he will check up and inspect 
the tools and appliances belonging to the machine. He will 
make ordinary repairs to the machine tools. 

Belt Man. He will be responsible for the care of all belts 
and will follow the detailed instructions issued regarding the 
care of belting. He will oil all main shafting and counter- 
shafting. 

DELIVERY OF TOOLS TO MACHINES. 

It will be the duty of the gang boss to see that every ma- 
chine is supplied in advance with proper tools. Each ma- 
chine is supplied with a handled tool tray. In a holder on 
this tray is a pad with a pencil attached by a string. The 
gang boss writes on the pad the tools required for the next 
job. The tool boys will make trips around the shop every 
fifteen minutes to bring new tools from the tool room and 
to return dulled tools. When it is necessary to make special 



MACHINE SHOP METHODS 201 

lathe or planer tools for a job, the gang boss will have two of 
each kind made, so that while one tool is in the machine the 
other can be reground. After the job is accepted by the 
speed boss he is responsible for the tools, and must see that 
the tools are kept in good condition and that the workman 
does not have to wait for a sharp tool. The gang boss is 
responsible for any delays due to lack of proper tools, the 
speed boss is responsible for delays due to lack of sharp 
tools. 

THE OPERATION OF THE SYSTEM. 

In the planning room are the " standing-order boards." 
They consist of a number of boards about three feet square, 
mounted in a cluster in a frame and provided with sash cord 
and balancing weights. The " down " position of the board 
brings the lower edge of the board about 36 inches above the 
floor, this being a convenient working height. When a board 
is not in use it can be raised out of the way, exposing the 
next board in the rear. On these boards there is marked 
the number of every machine and vise in the shop. These 
are conveniently grouped; the turret lathes being grouped on 
one board, the shapers on another, planers on another, large 
engine lathes on another, small engine lathes another, milling 
machines another, vises another, etc. 

Under the number of each machine or vise there are three 
small spaces, the size of the standing-order slips, each pro- 
vided with hooks on which the standing-order slips are hung. 
The slip hanging on the upper hook shows that job to be 
actually in the machine ; the slip on the next lower hook shows 
that the job is at the machine, provided with tools, drawings, 
and all necessary information and is to go in the machine 
immediately the job in the machine is finished. The slips on 
the lowest hooks are the jobs in the shop, but not necessarily 
at the machine for which the gang boss is providing the 
necessary tools, drawings, etc. There will often be a num- 
ber of slips on the lowest hooks; the slip on top is the one 
that is to go to the second hook, and for which tools, etc., 



20. 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



should be provided ; the rotation numbers on the slips indicate 
the order in which the work will be taken up. 

In a case underneath the 
boards are filed the route 
sheets and instruction cards. 
It is by means of the 
boards that the planner can 
keep track of the work as it 
goes through the shop. The 
illustration, Fig. 21, shows 
clearly the boards and the 
standing-order slips. 

At each machine there is a 
holder which has three pock- 
ets for instruction cards. 
These cards represent the 
same jobs as the standing or- 
ders for that machine on the 
board in the planner's room. 
The card in the upper pocket 
represents the work in the 
machine. The card in the 
middle pocket represents jobs 
at the machine for which 
tools, jigs, drawings, etc., are 
assembled. The cards in the 
lower pocket represent jobs 
in the shop, but not necessar- 
ily at the machine, for which 
tools, jigs, drawings, etc., are 
being collected. 

Upon the completion of the 
job represented by the card 
in the top pocket the work- 
man will remove the card, note the time of completion on its 
face, and hang it on the hook for completed work, and will 
shift the other two cards up. The holders for the cards and 



1 

fib m m 

1 -\ 

■itimmM 


tm 




1 : 

\ 


B- j imxwm* 


& 


I -mmmi"'-:Z 


E 


I i&Sk^ ..,ta^ .. iniMB10l[llll|| || 




— 

Jam*" 



Fig. 21. Standing Order Boards 
in the machine shop planning 
department. from these any 
job in the shop can be imme- 
diately located. 



MACHINE SHOP METHODS 



203 



also the hook for the completed cards are shown in the illus- 
tration, Fig. 22. 

The tool boy will collect the completed instruction cards 
and take them to the planning 
department. Here the standing 
order for this job will be re- 
moved from the board and the 
instruction card will be put on 
the " move hook," where it will 
be found by the move man on 
his rounds, and serves as an or- 
der to him to make the move 
to the machine designated on 
the card. After the work has 
been moved, the move man will 
initial the card and return it to 
the planning department, this 
serving as a notice to this de- 
partment that the work is at the 
next machine. This method 
will be continued from machine 
to machine until the work is in- 
spected and ready for delivery. 

Other forms used, which re- 
quire no explanation, are shown 
in Fig. 23, Page 204, a damage 
report; Fig. 24, Page 205, a 
shop observation card; Fig. 25, 
Page 206, a shop record card; 
and Fig. 26, an index card for 
special tools and jigs. The shop 
observation card is used for 




Fig. 22. Holder 
instruction cards 
issued to the 
workmen. Time 
tickets are shown 
on hooks above 
the holder. 



stop-watch time studies. 



COOPERATION. 



There must be cooperation among the planning-room staff, 
and also among the planners and the gang bosses. While 
each man has a definite duty to perform the result of his 



20T COST KEEPING AND SCIENTIFIC MANAGEMENT 



Mfg. Dept #807 

DAMAGE REPORT 
MEG. DEPT 
NAVY YARD, MARE ISLAND 



Da t e : -^.rZZrL <2JL_ Che ck No . Z2-2£L — 

Ia!ae : M^Tze&^cbcz^'ZL Rate . z*^4L_^_ri^k. 

I have damaged, the following work under Jot 
Order No . -^^^-^/e. s?. 



>>ecTt<2jyL or ~7&4T- JrLfzyjg^^. tP/C'/T- 



Report of man in charge of work: 

jSjE1C^/P£50- 2?5.JZg^^£'— Jag--^^gg^/VV^" - J&JL* 



Report of master: 

Cf/r4rjL£'&SJ*drs^s. c&LJZkjc- *2Bsolti &<£+ 

replace 
Estimate to damage: 

oorroo t , . 

<4<£&£UF_ /^52L 



'Tor**.. 'Z.ZS* 

Action of Naval Constructor: 



^£^g^>3^g^. 



Fig. 23. Damage Report submitted for damage to work or machines. 



MACHINE SHOP METHODS 



205 



Ch 

Q 


\4 


W 




























M 

ft 

J 

A 

H 

z J 

P^ 
<^ 

* J 

if) fc 
m,o; 
OM 

DL ^i 

Hi 

1 >i 


* 




























(0 




























M 


Si 

0< 


5! 


1 

s 




* 

^ 


















- 


5 


$ 
^ 

N 


K 
N 




55 

N 


















(0 

z 


h 
< 

Id 
Q. 


lL 



z 



E 

E 

ii 

Q 


1 

1 


i 
\ 

ft 
1 


I 

5 




s 




















< 


m 





Q 


UJ 


\L 


ej 


I 




-1 


* 


-J 


z 


CO 

at 
u 

Q 
K 


n 




H 
31 

> j 

*• j 

i 

U. 



K 
LU 

I 

I 
u 


w N 

i 

s 

X 
E 
O 

3 


K 

\ 
\ 

i 

t 
« 



1 

4 


■1 

N 

N 

!: 

w 

d 

U 

2 

1 

2 


> 

E 

i 
s 




. 




5 

1 

N 

B 


3 

a 
u 
h 
u 
-1 
a 
2 





* 
a. 
< 
5 
u 
ff 


1 

I 

3 


j 

1 

K 


i 
k 

1 


S 


\ 

II 

il 







206 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



Plan No 

OB'N Time 
on one 



OPERATIONS. ^"^ i&r- 



ACT. Time ^g^^ -5^ *&*& j^^. -&,?„/„<.. 

on. one. 

REMARKS. 



Rate 



Fig. 25. Shop Record Card for recording observation times and average 
times as taken from time tickets. 



SPECIAL TOOLS & JIGS 
for ^ 

, ,y ^ Plan No. SC 



JIG No 



OPERATIONS USED FOR 






~&e>J?/A/G ^ov^g y= r or^ C&sST&'Ap'TSoi-'r 



T fffi* (ZOY E/F 



/I-4--3 



/!-+-* 



Fkc£" A- Cut £?/poov^7Z>/9 7rZy/3/s£yp Stjp /p 
'few, 7 ^ c£: t & F q / ta* /fe vftg c w Dec*- 



/?wy 



yf-^-s : 



tfoL£> /fVG*7)£Cfi<* 7p /S*G' W///JL£ TdeV'/YG £i/GS 



#-*-e 



^/P/AA/Ag T^/p/VC ^L 



tf-4-7 



D/ ?/±J. 3 f CDVStfr£*>S//V/C //tftXJ /^>P ^/)//yg^iv^ 



% 



Fig. 26. Index Card for special tools and jigs. This index is in the 
planning department and the instruction card man can quickly 
determine the tools on hand for each job. 



MACHINE SHOP METHODS 20J 

work must be passed along to the next man, and the next, 
until the job is complete. All great things are accomplished 
by the cooperation of several men, and little can be accom- 
plished without cooperation. Any system to be successful 
must have cooperation, and must be such that if this is not 
obtained the blame can be definitely fixed. 

In the system outlined this is accomplished; the duties of 
each man are definitely fixed, and the duties of the man who 
follows cannot be accomplished until those of the preceding 
man have been satisfactorily completed; each forces the other 
to do his work, and if this is not done the fault is immedi- 
ately revealed. 



CHAPTER XIV 

Organization of a Smith Shop, a Woodworking Shop, 
and a Canvas and Flag Shop 

Methods similar to those used in the machine shop, which 
are described in Chapter XIII, have been employed with suc- 
cess in a blacksmith shop, woodworking shop, canvas and flag 
shop, and sheet metal shop. While the general principles 
which govern are the same for all shops, the details must be 
made to suit varying conditions which exist in the several 
shops. The organization of a few of these shops and the 
methods followed will be briefly described. 

BLACKSMITH SHOP. 

Very little attention is given to organization or methods 
in commercial jobbing smith shops, yet as much can be ac- 
complished by study and analysis of methods in these shops 
as has been accomplished in machine shops. 

In describing the organization and methods of the smith 
shop, I wish to emphasize that the improvements made are 
really but the first steps towards scientific management, and 
are merely the introduction of a systematic and logical 
method of handling the work where none existed. 

Unfortunately the same conditions exist in the great ma- 
jority of the jobbing smith shops throughout the country. 
The methods employed in the shop under consideration are 
simple and can be used in any shop, and in the great ma- 
jority will result in marked improvement, but these methods 
are recommended only as the first step toward scientific man- 
agement. 

208 



ORGANIZATION OF VARIOUS SHOPS 



209 




To Circulating Tank 1 



,s^\nn^snsvS.s\v^v.'^ 



From Circulating Tank 



2 TO COST KEEPING AND SCIENTIFIC MANAGEMENT 




Fig. 28. Smith Shop, Mare Island Navy Yard, north wing. Miscel- 
laneous SMALL WORK. 




Fig. 29. Smith Shop, Mare Island Navy Yard, main bay. Medium 

size WORK. 



ORGANIZATION OF VARIOUS SHOPS 



211 




Fig. 30. Smith Shop, Mare Island Navy Yard, south wing. Heavy 
forge department. 




Fig. 31. Smith Shop, Mare Island Navy Yard. Foreman's Office. 
Work board on the right. 



212 



COST KEEPING AND SCIENTIFIC MANAGEMENT 




ORGANIZATION OF VARIOUS SHOPS 2IJ 

GENERAL ARRANGEMENT OF SHOP. 

The general arrangement of the shop, location of tools, 
cranes, etc., are shown in Figs. 2j, 28, 29 and 30. 

The arrangement of the office, storeroom, wash room, 
lunch room and water closet is shown in Figs. 31 and 32. 
Very few smith shops are provided with facilities for the 
comfort of the workmen. In machine shops elaborate wash- 
ing facilities are usually provided for the men, while in black- 
smith shops, where more needed, they are seldom found. 
In the arrangement shown, the necessary office space, lava- 
tory arrangements, etc., are provided at minimum cost in 
space. 

The shop organization provides for the following sub-de- 
partments : 

1. Miscellaneous small work. 

2. Heavy forge work. 

3. Bolt machine department. 

4. Drop forge department. 

5. Tool dressing and tempering department. 

The forges, furnaces, hammers, cranes and other facilities 
are grouped as far as possible to bring the work of each of the 
divisions named together. 

The shop is entered at two points by a standard gauge 
track, and all heavy material is handled to and from the shop 
on cars served by the shop cranes. The railway tracks pass 
immediately adjacent to the east end of the north wing of the 
shop, from which all light material is shipped. 

Transportation to and from other shops and the store- 
house is by means of the plant railway freight service. Trans- 
portation inside of the shop is by means of electric jib cranes, 
and industrial railway tracks which serve the shop and the 
material yard. 

The duties of the foremen and others, and the routine to 
be followed, are defined in detail written instruction issued to 
the shop, and in the description which follows, these instruc- 
tions are freely quoted. 



214 C0ST KEEPING AND SCIENTIFIC MANAGEMENT 

foreman's RESPONSIBILITY AND DUTIES. 

The foreman is held directly responsible for all work in 
his department. He is expected to maintain the highest effi- 
ciency possible in his organization. Owing to his superior 
mechanical ability he is expected to devise schemes and meth- 
ods equal, and, if possible, superior to those in other large 
plants handling similar work. He will make a study of the 
special ability of each individual mechanic. 

He will in person receive all orders for work to be exe- 
cuted in his department. Upon receipt of job orders or shop 
orders, he will go over each and designate to whom the work 
shall be assigned, giving the necessary instructions, and note 
particularly any peculiarity or unusual conditions regarding 
the work, furnishing the data necessary for the route man to 
make out the instruction cards intelligently. 

He will utilize any special tools on hand that can be used 
to advantage, and if none are available and he considers it 
desirable to make such tools for a job, he will request the nec- 
essary authority from the shop superintendent. 

In other words, the foreman will give each job order his 
personal attention and study, assuring himself that all details 
have been arranged to enable the work to be completed ex- 
peditiously and economically. 

These instructions are not to be construed to make an office 
clerk of the foreman. It is intended that every job to be ac- 
complished shall be analyzed and planned by the foreman be- 
fore being undertaken in order that each may receive the bene- 
fit of his experience and knowledge. 

In carrying out these duties the foreman will have the 
assistance of two assistant foremen on the floor of the shop, 
one in charge of all small work in the north end of the shop, 
and the other in charge of the heavy work, the bolt machines 
and the tool department in the south end of the shop. He 
will also be assisted by a route man, an office clerk, a ma- 
terial and move man, and messenger boy. The duties of the 
various assistants to the foreman are as follows : 



ORGANIZATION OF VARIOUS SHOPS 21 5 

Assistant Foremen. Each assistant foreman is responsible 
to the foreman for all work performed in his division. It 
is his duty to see that each workman properly understands 
the work assigned to him, and he will supply the workmen 
with all information necessary to carry out the directions 
given on the instruction cards. He will see that each work- 
man has at least one job ahead with the necessary stock at 
the forge and with the necessary templates, sketches, or 
plans, in order that the work may be immediately taken up 
when the job in hand is completed. 

When a new instruction card is issued, it is the duty of 
the assistant foreman to decide upon the detail methods to be 
followed to carry out the instructions, and the proper size 
and amount of material required. 

In ordering stock the assistant will use an order slip, 
giving the size and amount of stock required, the job order 
number, and the forge at which the material should be 
placed. This slip will be dated and signed by the assistant 
foreman and will be given to the material and move man. 
If, in any case, he is in doubt, the foreman will be immedi- 
ately consulted. 

The assistant will inspect all finished work before it leaves 
the forge, and will attach a tag giving the necessary informa- 
tion to enable the move man to move the work to its proper 
place. 

Route Man. The route man will carry out the details of 
routing the work from the data contained in the job order or 
shop order, and the instructions received from the foreman. 
He will make out and issue the instruction cards and make 
out the standing-order cards for the same. He will keep the 
route board in the foreman's office to conform to the exact 
condition of the work in the shop. 

He will keep the order file up to date, filing promptly or- 
ders that have been routed and removing orders that have 
been completed. He will keep the " tickler " file for prom- 
ises made to other shops, or promises made by other shops. 
The route man will make sketches when necessary, to issue 



2l6 COST KEEPING AND SCIENTIFIC MANAGEMENT 

with the instruction cards. He will index and file all plans 
received in the shop. 

Office Clerk. The office clerk will keep the records of the 
men, attend to the time cards, check the records of time given 
on the instruction cards and file the same. He will make 
out requisitions for material from the storehouse as called 
for on the order slips furnished by the material and move 
man. He will keep the " orders to foremen " files up to date 
and perform all clerical work required in connection with the 
work of the shop. 

Material and Move Man. The material and move man 
will keep an accurate record on the stock cards of the ma- 
terial on hand. He will see that all requests from the 
assistant foremen for material are immediately supplied ex- 
actly as called for and that it is delivered to the forge speci- 
fied on the order slip. The order slips will be turned over to 
the office clerk daily. He will keep a record of the fire 
bricks used by each forge and furnace ; he will record the 
oil meter readings ; he will remove finished work from the 
forge to the station specified on the tag attached to the work. 
A laborer will be assigned to him as an assistant, and when 
he requires additional labor to handle heavy stock the assistant 
foreman will supply the necessary men. 

OPERATION OF THE SYSTEM. 

All work is ordered either by job order or shop order 
from another shop. The issue of these orders has been 
fully described in preceding chapters. As the greater part 
of the work consists of repairs where the smith work is only 
a small part of the job, the greater portion of the work in 
the smith shop is on shop orders from other shops. 

The shop orders and job orders go direct to the foreman, 
who studies each order and notes on the back of the order 
such instructions as he thinks necessary. He also assigns 
the work, which he is able to do, for the work board in 
his office shows the work assigned to each forge or furnace. 

The orders then go to the route man, who makes out the 



ORGANIZATION OF VARIOUS SHOPS 



217 



instruction cards, which are to go to the workmen, and the 
standing-order slips, which are to go to the work board in 
the foreman's office. 

The instruction card is shown in Fig. 33, and is self- 
explanatory. At each forge or furnace there is a holder for 
three cards as previously described for the machine shop. 
Each workman in charge of a gang records on the card 



CHECK No *6 / * & JOB ORDER No //£//° / 



ARTICLE 



|Q «*S//w/ j OB ORDER No //*J/fV / 



INSTRUCTIONS 







<2o^t*S 



•for ^1 

































C7W^C^ ^=/<y^rr7^u^5 ^d> *z£. CZU^xs^ 1&W2//2, 


/ / / 




DATE 


RT 


HR 


DATE 


RT 


HR 


DATE 


RT 


HR 


DATE 


RT 


HR 


DATE 


RT 


HR. 


1/-/4-/& 


S3 


z 


4t-/J-- /<0 


S3 


2, 


U-/?-/o 


fd 


A 














■ * 


J4 


? 


a 


36 


3^ 




34 


6 














/f « 


H 


? 


„ 


36 


2. 

















































































Fig. 33. Instruction Card, smith shop. 



the time each man of the gang works on the job. For each 
instruction card there is a corresponding standing-order slip 
which contains a brief of the job, the job number, and the 
forge or furnace to which the work is assigned. These are 
placed on the work board. 

The work board, Fig. 34, is divided for the forges and 
furnaces, and has the check numbers of men in charge of 
gangs above the hooks on which the standing-order slips 
hang. The board is also provided with file cases for active 
and inactive orders, and pigeon holes for prepared instruc- 
tion cards which are not yet assigned, and files for com- 
pleted instruction cards. 



2l8 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



I j I Ml III 

I I l\| !M M | 

nil) r ■ i , 

JK l I I I I i M • 




i i il'i 

1 111 '!" 






W 




pq 



ORGANIZATION OF VARIOUS SHOPS 2ig 

When there are already three jobs at a forge, the in- 
struction card with the standing-order slip pinned to it is 
placed in a pigeon hole under the proper heading. The 
foreman can determine from the work board the condition 
of the work in the shop. He can see the location of each 
job and the amount of work in the shop not yet assigned 
to a forge. From this inspection and consultation with his 
tickler file of promises he can learn whether he should take 
on additional men or change some of the assignments al- 
ready made to give preference to work required at an early 
date. 

The assistant foreman in charge of a division begins the 
assembly of tools, drawings and material, as soon as a new 
instruction card is issued. He makes out a material slip 
for the material required and gives this to the material man. 
If the material is on hand in the shop stock it is drawn, and 
if not the office clerk is notified and it is ordered from the 
main store. 

When a job is completed the man in charge of the gang, 
after entering the time of the gang, removes the card from 
the holder and hangs it on a hook provided and moves up 
his next card and starts his job. 

The assistant foreman inspects the completed job, initials 
the instruction card, and attaches to the work a tag bearing 
his inspection mark and designating the place to which the 
work will be moved. 

The material man moves the work and takes the instruc- 
tion card to the office and places it in the basket provided on 
the desk of the route man. 

The route man removes the standing-order slip from the 
work board and the order for the work from the file, pins 
the latter to the instruction card and places the two in a 
basket provided on the desk of the foreman. The foreman 
will close the job, returning the order with the date of com- 
pletion marked. 

The costs of direct labor as shown by the instruction cards 
will be scrutinized and compared with previous costs, and 



220 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



then will be indexed and filed. The shop superintendent 
goes over these records frequently and picks out and has 
recorded such as can be used as standard costs. 

In addition to the detail record of time kept on each job 
on the instruction cards, each man makes out his own time 
card for each job on which he works each day. These time 
slips go to the accounting department in the main office and 
from them the pay roll is made up. They are also posted 
under each shop to the job number and it is from this record 




Fig. 35. Racks for storage of material and tools. 



that the total cost, including, usually work in a number 
of shops, is obtained. It will thus be seen that there is 
some duplication in the records. This duplication pays for 
itself many times over, as it enables detail costs of each 
operation to be obtained, and it enables the foreman and 
shop superintendent to obtain, immediately a job is com- 
pleted, the direct cost of each operation. 

A reasonable supply of ordinary material is maintained 
in the shop store. In Fig. 35 the racks for the storage of 
bar material are shown. The main supply of material, how- 



ORGANIZATION OF VARIOUS SHOPS 



MFG. DEPT. NO. 703. 

ARTICLE 3 A:_XZl . 22tU4L<££*/- 






MAxmvM___^_<?_0__,c3r. . minimum._/_^^_- ^^_.._. 


6 

z 

o 
K 




i 

D 

m 
■ 




U 

> 

i 
u 

u 

E 


Id 

h 
4 
Q 


u 



z 

4 
J 
4 
01 




z 
c 

Id 


£ 

1 O 



Id 
D 
W 
W 


Q 
Id 
> 

s 



Id 

K 


Id 

4 



Id 
U 

z 

4 
J 
4 
ID 








'//2.//0 


*/-8o 












/7<///srV 


3, -To 




//>#// 6 


/j 












3fY/</o 


¥s 




f/o.//to 


8S 












tyd/ts* 




3 So 


W2.Z 


4 3S 














#0 




z/3 


3SS 












/ o *2- 


/ z. 




/ 
z/2./ 


3 4-S 












/ / 4-0 


6 o 




/ 
3/4X 


Zd°S 












3// ; 




So 


/ 

2/3 


3&3 












39/ , 




/OS 


3/, 


468 












/ 
Z9o/ 


*to 




/ 

$6/ 


</-z8 










p— ^ 








/ 


























^ 

































































































Fig. 36. Stock Card for smith shop store. 



222 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



ever, is the general storehouse, which is dra\vn on for ma- 
terial not in the shop store and for replenishing the latter. 

An accurate record is kept of all material in the shop 
store on a stock card, Fig. 36, which shows receipts and 
issues, and on the inventory cards, Fig. 37, which are self- 
explanatory. 



Article 3 X 3" /^UZ^C^^t^^y /fZltJL> - X)X^<j4-vt^6- 


Maximum /SOOO Mimimiim YO . 


DATE OF 
INVENTORY 


ISSUED SINCE 

LAST 

INVENTORY 


REC'D SINCE 

LAST 

INVENTORY 


BAI . SHOWN 

ON STOCK. 

CARD 


INVENTORY 
COUNT 


DIFF. 


INVENTORY 
TAKEN BY 


(L~~*jt- to 


// &6o 


Cftf-ZO 


/3&8Z 


/3S*6 


/36 


/S.Tfc 


vS*r/ y./o 


/?Z' o 


/# y oo 


/2 8*£o 


/Z 780 


60 


^^ 














/__ 












__^~ — - 































Fig. 37. Inventory Card for smith shop store. 

The absence of smoke and soot, which are usually as- 
sociated with a smith shop, will no doubt be noticed in the 
illustrations. This is due to the use of oil fuel, not only 
for the furnaces, but also for open forges. This is the 
first shop in the world to use oil exclusively. 



ORGANIZATION OF A LARGE WOOD-WORKING SHOP. 

The joiner work at a large navy yard comprises not only 
the usual work in the shop, but also work on ships and 
work in buildings. The greater part of the work outside 
of the shop is on ships. Practically all of this is special, 
and, due to the small openings through which the work 
must be carried for installation, it must be erected in small 
sections, necessitating more work than would otherwise be 
required. Very little ship work is what might be called 
rectangular, nearly all is beveled on account of the sheer 
and crown of the decks. This makes the work costly, not 
only in the shop but also in erection, as much hand work is 
involved. 



ORGANIZATION OF VARIOUS SHOPS 223 

Before the organization was improved much time was lost 
by workmen going to and from the shop. At a navy yard, 
ships are often berthed at considerable distances from the 
shop and much time may be lost by men going from the ships 
to the shop. With the ordinary workman there is little look- 
ing ahead, and it is more often the case than otherwise that 
he only sees that he requires shop work when he gets to the 
point where he must stop until this work is obtained ; he then 
goes to the shop to make known his needs and wait for the 
work, or perhaps to hunt up the material and do the neces- 
sary machine work himself. 

This may seem an exaggerated case, but, unfortunately 
such cases were of frequent occurrence before the work was 
systematized. Each man planned his own work, and he also 
wished to do it all, including selecting and machining the 
material and erecting it on the ship, and even carrying it to 
the ship on a push cart, assisted by the men who worked 
with him. The work was rarely planned before being under- 
taken, and nothing was provided until its necessity stopped 
the work until obtained. 

An organization is required which secures cooperation be- 
tween the outside and shop forces. If this is not obtained 
there will be large losses due to the outside force not receiving 
the shop work in the proper order and at the proper times, 
or to the outside force doing work by hand which should 
be done in the shop. 

The organization which was developed provides : 

1. Careful analysis of the work to be accomplished. 

2. Division of the work into natural elements. Written instruc- 

tions of the work required ; each class of work to be done 
by men specially trained for this class. 

3. Collection of drawings and information required by each divi- 

sion to enable it to accomplish its work. 

4. Collection of the material required and its delivery to the 

proper division at the right time. 

5. Assembly of the finished material and delivery to the outside 

force when needed. 



224 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



The force naturally divides itself into three general groups, 
viz. : ship work, buildings, and shop work, with an assistant 
foreman in charge of each division. 

All material for the two outside divisions, whether rough 
or dressed lumber, finished furniture, hardware, or other 
material, is obtained through the shop and furnished where 
required. The workmen are not allowed to go to the shop 
for this material. 



SHOP WORK. 



The shop itself is well equipped, as can be seen from the 
illustration, Fig. 38. The building is well lighted and ven- 




Upper Floor of joiner shop, Mare Island Navy Yard. 



tilated and equipped with an efficient dust-collecting system. 
Excellent wash and toilet rooms are provided. The ma- 
chinery is modern and is driven by individual motors, obviat- 
ing the usual mass of belting and shafting. In fact, every 
physical condition is met for good work at low cost. 

The work naturally divides itself into the following five 
divisions : 



ORGANIZATION OF VARIOUS SHOPS 225 

(a) Rough Machine Division, comprising heavy band sawing, 

re-sawing, planing, and matched material and molding in 
quantities. This division takes in the lower floor of the 
joiner shop and the saw mill. The greater part of the ma- 
terial manufactured in this division does not go to the 
finished machine division on the upper floor of the joiner 
shop, but is generally the product of a saw mill and plan- 
ing mill, and is finished material when it leaves this divi- 
sion. 

(b) Finished Machine Division, comprising work done on the 

upper floor, as light re-sawing, rip sawing, dove-tailing, 
mortising, tenoning, shaper work, light planer work, etc. 
* (c) Carpenter Division. 

(d) Joiner Division. 

(e) Cabinet-making Division. 

The last three divisions cover bench work and minor in- 
cidental machine work, and the limits of the work of each 
division are shown by the designations. While it is de- 
sirable that the great mass of the machine work should be 
done by expert machine hands and not by the bench men, if 
the bench men are prohibited from using the machine tools 
excessive hand work will result. Rip and cut-off saws, band 
saws and jointers are conveniently placed to the benches and 
the bench men are allowed and required to operate these as 
necessary, but supervision is exercised to check any tendency 
of the bench hands to do work which should be done by the 
machine division. 

All job orders and shop orders for work go to the fore- 
man's desk and he gives each his personal attention. He 
notes on the back of each, in a form provided, the assistant 
to whom the work is assigned, the kind and quality of ma- 
terial to be used, and any special instructions or information 
which he deems necessary to enable the job to be carried 
through expeditiously and economically. 

The order then goes to the route man, who makes the in- 
struction cards. For outside work these go to the designated 
outside assistant, who investigates the job, orders the ma- 
terial, makes orders on the shop for necessary machine work, 
and details the outside man for the job, entering a standing- 



226 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



order slip and placing it on the work board under the man's 
check number. 

For shop work the route man makes out the instruction 
cards, which are similar to those described for the smith 
shop, and orders material not carried in the shop store. The 
instruction cards go to the gang boss on the shop floor. 
From his knowledge of the work and an inspection of the 



J. O. No. 
Check No. 



Machine Division'. 
Sections 



Date 



Rough Macbg. 


No. 

2 


Turning 


No. 
3 


Resaw 


No. 
4 


Barge. Lumber 


Tenoning 


Cutoff 


Mouldings 


Mortising 


Planing 


Dressing 


Boring 


Jointing 



Shaper 



Scroll Saw 



Panel Macli 



Xo. 
5 



Sticker 
Sander 



Dovetlr 



Section 



Forw'd to 




Fig. 39. 
work board, which shows the assignment of every job or- 
dered, he can tell where the new work can best be placed. 
He assigns the joiner who is to lead on the job and such 
men as are necessary to assist him. The man who is to lead 
gets the original instruction card, while those who are to 
assist get cards giving the charge number and the name of 
the man leading on the job. 

The leading-man on a job, when he receives a new instruc- 
tion card, lays out the work and orders the necessary ma- 
chine work on a machine card, Fig. 39. After filling out 
this card he hangs it on a hook on his board and it is taken 



ORGANIZATION OF VARIOUS SHOPS 22J 

up by the material man, who obtains from the route man 
copies of the orders for material and receives and checks 
this material. He also obtains from the shop store all minor 
material needed. When the rough material is received it is 
rough machined and sent to the bench for laying off, and 
then delivered to the various special machine men for such 
operations as dove-tailing, turning, shaping, mortising, etc. 
The machine card shows the sequence of these operations 
and follows the material through the shop until it is re- 
turned to the bench ready for assembling. 

The work board, tickler files, instruction-card holders, 
storeroom methods, methods of transportation, etc., are the 
same as those previously described for other shops. 

In work which is repeated, detail records are kept of the 
time and cost of the various operations, and these are care- 
fully analyzed and studied to determine where cost can be 
reduced. Since the adoption of the system outlined, large 
reductions have been made in costs. In work that is repeated 
the costs have in nearly all cases been cut in half, while in 
some cases the reduction has been even greater. 

ORGANIZATION OF CANVAS SHOP AND FLAG SHOP. 

In these shops, as elsewhere, no attempt had previously 
been made to separate the work into elements and to give 
each part to those best qualified for that class of work. 
For example, in making an intricate foreign flag the whole 
job was assigned to one worker who laid out the design, 
did the cutting, basting, stitching, embroidering, heading, 
pressing and folding. 

Under the new system the work is distributed to the fol- 
lowing named sections : Marking, cutting, basting, machining, 
heading and pressing. The division of the shop in sections, 
and the general arrangements, are shown in the illustrations, 
Figs. 40, 41 and 42. To each section is assigned the workers 
best qualified for each class of work. 

In the canvas shop the conditions were the same as those 
described for the flag shop, and similar changes were made 



228 COST KEEPING AND SCIENTIFIC MANAGEMENT 




Fig. 40. Flag Shop. Design, marking and cutting departments. 
Note instruction cards for each worker. 




Fig. 41. Flag Shop. Basting and machine departments. All ma- 
chines ARE MOTOR DRIVEN. 



ORGANIZATION OF VARIOUS SHOPS 



129 



f 

■B 11 1 H 

1 




1BV II 

;Wt||||i|Bl 



Fig. 42. Flag Shop, inspection table. Work board on the left. 

in organization. In this shop the work is distributed among 
four departments, as follows : 

(1) Laying Out and Cutting. This work is done under the 
immediate supervision of the foreman. One man does practically 
all laying out, cutting and the preparation of material before it 
goes to the operators. 

(2) Machine Department. This includes all stitching where it 
is possible to use a machine. 

(3) Finishers. Includes all finishing on the work which has 
passed through the machines, such as hand stitching, roping, 
working eyelets, grommets, rings, etc. 

(4) Hand Workers. Includes all hand work where no part 
of the work is done by machine. 



ROUTING WORK. 

All work is carefully planned and routed, and written in- 
struction cards issued. All material necessary for a job 
is assembled before the work is undertaken, and is delivered 
to the proper section at the right time. The work board, 
material order sheets, instruction-card holders, etc., are the 
same as those previously described. The route sheet differs 
from that used in other shops and previously described. A 
great deal of the output is duplicate manufacture work, and 



230 



COST KEEPING AND SCIENTIFIC MANAGEMENT 





! i ! 


CO 
























ill' 


cr 
























i i 


ID 


W 


^ 


o 


oo 


o> 


\ 


^ 








tf! 


!*N>J 


o 


\ 


^ 


\3 


^ 


^ 


\o 


vo 


































a. 






^ 




i 


5. 


1 










O 

o 


^ 


■o 


X) 




NO 




\3 






























d 


| DQ J--! 


LU 

3 


^ 




^ 

w 




<0 












or 


! <<< 
M S 5 


CO 
CO 


^ 


4 


^ 
















UJ 


i Q 
























Q 
























o 
o 

— > 


! <v 

i ^ 

1 NXJ 

i fy 


LU 

< 

2 




O 


»0 


*3 

to 






N 








































<0 


















1 




X 




4 


\ ^ 


* 


* 


5 














^ 




^ 














Or 


tfcj 

X N id 


O 

< 

o: 

LU 
Q_ 

o 


1 

X 

v5 


X 

^ 

1 

* 

^ 

£ 

£ 

^ 


1 

<*> 


\ 


^ 


* 


* 






























Oi 


LU 


\ 


<^ 




















=D 


< 


DQ 


O 


Q 


u 


Li_ 


O 


X 


—i 




Q 
LU 


\J| 03 

i 3 

_J 

uj <i 


o 
























<y 


S 


-^ 




> 










< 

6 


^ LU 

DC <! 


h- 

o: 
< 

Ql 










^ 

^ 












2 


< s 




4 


«o 




<3 













ORGANIZATION OF VARIOUS SHOPS 23 1 

it is desirable to have accurate record of the times taken 
on the various operations, and also the direct cost, in such 
shape that comparisons can readily be made of the work 
accomplished. * The route sheet, Fig. 43, is an envelope, on 
the front of which in appropriate columns the order is re- 
corded, the operations are defined, and the assignment of 
the work made. When the work is completed the dates of 
completion are entered and also the time taken for each 
operation and the total direct cost of the job. This envelope 
forms an excellent pocket for filing the completed instruc- 
tion cards, bills of material, and other data regarding the 
job, the condensed information being given on the outside. 

The instruction card contains a description of the work 
required and has blanks in which the workman enters his 
time each day until the job is completed. After the work 
has been inspected, the time and direct cost records are com- 
piled from these cards and entered on the route sheet en- 
velope and the cards are filed in the envelope. 

Owing to changes made in organization and methods in 
these two shops the output for each worker has been greatly 
increased. With the same quantity of work only half the 
number of workers previously employed are required. In 
the following chapter there will be given data of reductions 
made in cost due to the better methods employed. 



CHAPTER XV 

Reductions in Costs Due to Scientific Methods 

The Mare Island Navy Yard labors under, the disadvan- 
tage of a limited supply of skilled mechanics and high daily 
wages. First class mechanics at this yard receive from 52 
to 63 cents an hour, while helpers and laborers receive 30 
to 33 cents an hour. It would seem that the high cost 
of labor would have brought forth the best efforts to secure 
scientific management. Such, however, was not the case; 
the very fact that labor wages are high brought about the 
assumption that Mare Island could not compete with other 
navy yards. When high costs were reported conditions were 
not investigated, as it was assumed that the high cost was 
due to the high wages. 

In the past few years the general principles of Scientific 
Management have been followed, and there has been a re- 
markable increase in output and reduction in cost. It is 
entirely due to the adherence to these principles that this es- 
tablishment has been able to compete with Eastern navy yards 
where wages are much lower and the cost of material is less. 
It will not be possible to give the numerous cases where 
marked reductions in cost have been made, but a few ex- 
amples will be given to illustrate general conditions : 

shipbuilding. 

Shipbuilding comprises work in a large number of shops, 
foundry, machine shops, pattern shop, shiphtters' shop, joiner 
shop, electrical shop, coppersmith shop, sheet metal shop, etc. 

A large collier 450 feet long was built at the Mare Island 
yard, and a sister ship was at the same time built at a large 
Eastern navy yard. The two ships are identical, being built 
from the same detail plans. The wages at Mare Island are 

232 



REDUCTIONS IN COSTS DUE TO SCIENTIFIC METHODS 233 

approximately 25 per cent, greater than those of the Eastern 
yard ; the structural material for the Pacific coast built ship 
was necessarily obtained from the East and owing to trans- 
portation charges the cost was at least 25 per cent, greater 
than on the East coast. The cost of the ship built in the 
Eastern yard should therefore be approximately 25 per cent, 
less than the Western built ship, yet the Pacific coast yard, 
employing some of the fundamental principles of scientific 
management, built the ship for $100,000 less than the Eastern 
yard. 

BOAT BUILDING. 

A large number of small boats are each year built in the 
navy yards. As the boats are of standard design a direct 
comparison of costs can be obtained, and the amount saved 
on new boats by improved methods can be determined. At 
the Mare Island yard in two years' time the application of 
scientific methods of management reduced the cost of boats 
to approximately one-half previous costs and on the output 
of new boats in two years there was a saving on previous 
costs of over $25,000. In addition to the new work there is 
a large amount of repair work in this shop and the improved 
methods have greatly decreased the cost of this work, but the 
savings effected on repair work cannot be determined. 

WOOD CALKING. 

Practically all of the wood calkers on the Pacific coast 
belong to an association. This association is very powerful 
and very few care to antagonize it. The number of ap- 
prentices is limited and the output of the men is limited. 
Wages are very high, $5 and $6 a day being the prevailing 
wages. The calkers at the navy yard received $5 a day and 
they seldom ever reached in output the limits set. I was 
satisfied that the output was far too low, but for a long time 
was unable to increase it. 

Finally, after educating some men who could take the 
places of the calkers in case of trouble, and carefully ascer- 



234 COST KEEPING AND SCIENTIFIC MANAGEMENT 

taining the amount that a first-class man should do, I fixed 
a piece-work price which would allow the men to make from 
50 to 60 per cent, more than their day's wages and put all 
work on piece work. 

To enable these men to earn the 60 per cent, above day 
wages, it was necessary for them to do three and a half or 
four times as much as was accomplished at day work. The 
situation was accepted, and in a few weeks the men were 
actually doing from three to four times as much as was done 
before. 

It is now necessary, on account of the large output, to 
employ but a small number of men, and these are the very best 
of their class. They make large wages, are perfectly con- 
tented, and never give the management the slightest trouble. 

The output now obtained is far above that obtained in other 
establishments in the vicinity, and I believe exceeds the out- 
put obtained in Eastern establishments. The average output 
for representative classes of work is as follows: 

New Work: 

Decks, three threads 380 feet in 8 hours. 

Sides and bottom, four threads 265 feet in 8 hours. 

Old Work: 
Reave out putty, harden down, and calk 

one thread 425 feet in 8 hours. 

Reave out glue, harden down, and calk 

one thread 380 feet in 8 hours. 

BOILER SHOP. 

Conditions were known to be very bad in this shop. The 
foreman was not in sympathy with any changes and resisted 
efforts made to improve efficiency. The aim appeared to be 
to employ as many high-priced boilermakers as possible, re- 
gardless of expense. Under these conditions every change 
had to be considered with the greatest care before being put 
into effect. 

An assistant who had considerable experience in handling 
men. and who was endowed with much patience and tact, 



REDUCTIONS IN COSTS DUE TO SCIENTIFIC METHODS J35 

was put in the shop. This assistant was my representative 
in the shop and was given full authority to make changes. 
He was directed to fully study the situation before making 
his first change and to consult me daily regarding proposed 
measures. 

It was decided to take one job, the retubing of three water- 
tube boilers of the small tube type, and show what could 
be done by improving methods. In other words it was con- 
sidered necessary to make a demonstration that everyone 
could see before beginning a complete reorganization of the 
shop. The results obtained were far beyond expectations. 

A full description of the conditions found and the changes 
made cannot be given here. Generally, the. operations were 
made to follow each other in logical order, the tubes coming 
in the door and going from operator to operator until they 
reached the boiler. Proper tools and equipment were sup- 
plied, machine work replaced hand work, helpers and boys 
replaced boilermakers for the inferior work, each man's 
work was carefully planned and a definite assignment of work 
made, daily records were kept of the exact amount of work 
accomplished by each man, and all waits were eliminated. 
No attempt was made to drive the men, but the operations 
were so arranged that the work shoved the men; each opera- 
tion had to keep ahead of the operation behind, and if this 
was not the case it immediately showed up. 

A detail record of the time and cost of each operation was 
made. These records are of much interest, particularly as 
some of them showed such tremendous reductions in cost 
that they have been questioned. The man who has been 
outdistanced always questions the record of the man who 
has defeated him. One operation, the cutting out of the old 
tubes, has caused considerable comment. There were 4,600 
— i^-inch and 1 34 -inch, No. 11, B. W. G. tubes in the three 
boilers ; two cuts are required to remove the tubes, one at the 
top drum and one at the lower drum. Six expert chippers, 
working in pairs, cut out the tubes, and to each pair there 
was a helper to remove the tubes. The 4,600 tubes were cut 



236 COST KEEPING AND SCIENTIFIC MANAGEMENT 

out, removed from the boiler, and piled by these men \r\ j l / 2 
hours. This was at day work; not piece work! 

The other operations show equally as satisfactory results. 
The time taken previously to retube three boilers in the shop 
was from 80 to 90 days, and the direct labor cost was about 
$1,100 per boiler. The time taken under the changed con- 
ditions was 15 days and the direct labor cost was a little over 
$400 per boiler. 

MACHINE SHOP. 

In the machine shop by far the greater part of the work 
is repair work and comparisons showing the improvement 
cannot be made. In the manufacture of fittings, such as hose 
valves, air ports, boat castings, deck light fittings, etc., the 
costs were greatly reduced and in many cases were less than 
half previous costs. In the manufacture of steam winches, 
the cost was less than the cost of the same winches in Eastern 
yards. Not only did the better methods reduce the cost, but 
they greatly reduced the time required to do work, and this 
is important in a navy yard, which will be called on in time 
of war to make repairs to the fleet. 

CANVAS WORK. 

In the reorganization of the sail loft no attempt was made 
to drive the men. In no case were the men told that the 
output was small, or that it should be increased, and only in 
one case was there an intimation that the management was 
not satisfied with the amount of work done. 

As soon as the work was in some degree systematized, a 
record of the daily output of each man was made. The 
men themselves made these records, and they could not dis- 
pute them. As improvement was made and the output in- 
creased it was soon evident to the men themselves that it 
would be necessary to reduce the force. Previously, prac- 
tically all of the sailmakers in the immediate vicinity had 
been employed and the first cut in the force brought out the 
fact that it is difficult to obtain work in this district. With 



REDUCTIONS IN COSTS DUE TO SCIENTIFIC METHODS 237 

still further improvement a second small reduction was nec- 
essary, and this left about half the original force. These 
men are all excellent mechanics, who can produce a large 
output. The majority of these owned their homes in, and 
had strong ties binding them to, the vicinity, and they knew 
that if they lost their jobs they would have to leave their 
homes to obtain work. This brought about keen competition 
between the men, and resulted in a very large output. 

To show what has actually been accomplished, a few of the 
time reductions made are given below, the names of the work- 
men being omitted : 



Time Taken in Making Standard Navy Hammocks 

In Lots of Ten 

All Work by Hand. Machine Work Not Allowed 

Times Given are in Minutes for One Hammock 



Work- 
men. 



I. 

2. 

3- 
4- 

5- 
6. 

7- 
8. 

9- 
10. 
n. 
12. 

13- 

14. 



Time Taken 

First 

Records. 



I20 
I20 
120 
120 
120 
I20 
120 
120 
I20 
I20 
120 
I20 
I20 
120 



Date. 


Date. 


Date. 


4-13-10. 


4-16-10. 


4-20-10. 


78 
78 


72 
78 


72 
78 


90 
90 
90 
96 


90 
84 
84 
84 


90 
84 
84 
90 


I02 


I02 


90 


I20 


I20 


108 


I20 


120 


108 


I20 


120 


108 


I20 


I20 


96 


I20 


120 


I20 


I20 


I20 


96 


I20 


I20 


96 



Date. 
4-22-10. 



72 
72 
90 

84 
90 
96 
96 



These figures are interesting. Note that workman i and 2 
made a marked reduction at once; 3, 4 and 5 did very well, 
while 6 and 7 held back. Workmen 8 to 14 determined at 
first that they would make no cuts, but later, facing the work 
done by the other men, their resolution failed and a moderate 
cut was made. It was then that the management indicated 



2 3 8 



COST KEEPING AND SCIENTIFIC MANAGEMENT 



that better output was expected. A new lot of ten hammocks 
was ordered of each of these men (Nos. 8 to 14). The 
man's check number on the instruction card was written in 
large red figures and the word " Conditional " was written 
across the face of the card in large red letters. Nothing was 
said to the men, but it was seen as soon as the instruction 
cards were issued that the men understood the warning. Nos. 
8 and 9 equaled the best records, while 10, 11 and 12 made 




Fig. 44. Eight Hundred Pound Coaling Bag. Made entirely by hand 
in zYa hours. Former time, 12 hours. 

considerable improvement; 13 and 14 did not improve and 
were discharged. Further reduction can be made by substi- 
tuting machine work for hand work, but at present the spec- 
ifications prescribe hand work. 

These reductions reduced the cost of hammocks 75 cents 
each, and as large quantities are required, 2,000 for a single 
large ship, the saving effected is considerable. 

The time required in making clothes bags, 2,000 of which 



REDUCTIONS IN COSTS DUE TO SCIENTIFIC METHODS 



239 



are required for each large ship, was reduced from 60 minutes 
each to 36 minutes each. 

The most interesting reduction, however, was made in the 
manufacture of 800-lb coaling bags, shown in Fig. 44. The 
record of the times, taken after the material is prepared, is 
as follows: 



Date. 



Work- 
men. 


First 
Record. 


3-5-io. 


4-6-10. 


5-io-jo. 


5-16-10. 


6-2-10. 


6-15-10. 


I. 


390 


190 




180 


180 


171 


132 


2. 


390 


2IO 


195 


188 


180 


174 


156 


3- 


390 


220 


214 


188 


180 


180 


156 


4- 


390 


225 


2IO 


206 


180 


177 




5. 


390 


240 


206 




180 


180 


132 



For exactly the same work it will be seen that the time 
was reduced from 390 minutes per bag to 132. 

Cutting out, folding and creasing, and cutting ropes to 
length, in lots of 100, require seven minutes each; diagonal 
stitching the sides and bottoms on the machine in lots of 100 
takes 25 minutes each. The total time taken by the best 
workers to make a bag complete is therefore 2 2-3 hours. 
When the diagonal stitching is done by hand, the time for 
each bag is 3% hours. 

These bags are well made, being subjected to very hard 
usage in coaling ship, 800 pounds of coal being hoisted in 
each bag. From the illustration, the amount of Avork in- 
volved can be seen, and it must be admitted that to make 
one of these bags by hand in ^Ya hours requires skill and hard 
work. It is not believed that this time can be materially 
reduced by piece work, and if' these results are maintained 
there is little or no advantage, so far as this particular work 
is concerned, in either piece work or the premium system. 

Two years ago 12 hours was taken to manufacture a bag, 
while a year ago it took 8 hours, and this time has now been 



24O COST KEEPING AND SCIENTIFIC MANAGEMENT 

reduced to less than 3 hours. As the pay of sailmakers is 
58 cents an hour, the saving effected is very large. 

Similar reductions have been made in other classes of 
manufacture work, and also in all repair work. It is diffi- 
cult to believe that such large reductions can be made in work 
of this character, but the records are vouched for, and the 
performances described can be duplicated at any time. 

The reductions in cost which have been made at Mare 
Island in many different kinds of work will, it is hoped, be 
sufficient proof that an analysis and study of the work in any 
shop where the usual conditions prevail will result in large 
reductions in cost. Any manager of a commercial shop can 
go further on the road to Scientific Management than was 
possible in the government establishment. If managers will 
seriously make the attempt, the companies which they serve 
will be greatly benefited, and the managers will at least have 
the satisfaction of knowing that they are doing their part 
in the march of progress towards scientific methods of 
management. 



THE END 



INDEX 

A 

Accountants, expert, with no knowledge of shop conditions, cannot de- 
vise satisfactory cost system, 7. 

Accounting, simple, required for cost keeping purposes, 7. 

Accounting versus cost keeping, 6. 

Accuracy, importance of obtaining, in direct labor charges, 26. 

Advantages of cost system proposed, 69. 

Analysis of costs, improvement in methods due to, 13, 114. 

Analysis of expense accounts, 17, 95. 

Analysis of general expense, 96. 

Analysis of indirect charges to secure working minimum, 96. 

Analysis of shop expense, 95. 

Analysis of work before it is undertaken, 119. 

Analysis of work by the planning department, 184. 

Analysis of work in a joiner shop, 225. 

Assistants and gang bosses, danger of obtaining many outside of the 
establishment, 156. 

Assistants, shop superintendent should have competent, 144. 

Assistants should be trained to be thorough, 146. 

Average expense rates should not be used, 48. 



B 

Balance, daily, of stores should be furnished the shops, 168. 
Balance, monthly, of accounts desirable, 18. 
Balance, monthly, information given by, 18. 
Belt bench and records of belts, 152. 
Belt man, duties of, 152, 200. 
Belting, care of, 142, 151. 
Belts, central repair station for, 152. 

Belts, detailed written instructions regarding care of, 152. 
Blanks, uniform sizes for, 55. 

Boatbuilding, reductions in cost made at Mare Island, 233. 
Boiler work, reductions in costs made at Mare Island, 234. 
Blacksmith shop, improvements made by means of time studies, 131, 135. 
Blacksmith shop, see Smith shop. 
Breakage of tools, 149. 

Bonus system compared with the premium system, 107. 
Bonus system for the payment of labor, 107. 
Bonus system requires a scientific rate-making department, in. 
Boss, gang, duties of, 198. 
Boss, speed, duties of, 198. 

Bosses, danger of obtaining many outside of the establishment, 156. 
Bolt machine department of smith shop, 213. 

Business, to-day's important, shown on a blackboard in the planning de- 
partment, 186. 

241 



242 INDEX 



Calking, wood, reductions in the cost of, at the Mare Island Navy 

Yard, 233. 
Canvas shop, details of shop system, 229. 
Canvas shop, organization of, 227. 
Canvas work, reductions in the cost of, at the Mare Island Navy Yard, 

236. 
Central repair station for belts, 152. 
Central tool grinding room, 148, 178. 
Central tool issue room, 178. 
Changes, output must not suffer during, 145. 
Changes should not be made until investigated and probable results fully 

considered, 146. 
Changes should not be put into effect "on trial," 147. 
Charge symbols for expense accounts, 71. 
Check, double, system for issue of tools, 148. 
Clerk, machine shop, duties of, 195. 
Clerk, smith shop, duties of, 216. 
Comparison of indirect charges by means of curves or parallel columns, 

17, 95. 

Competition most feared is that of an establishment which does not ob- 
tain accurate costs, 4. 

Competition, unprofitable, among machine tool builders due to inaccurate 
costs, 2. 

Completion of work, difficulty of obtaining accurate promises of, 173. 

Conditions, unsatisfactory, must be reported to gang bosses by the work- 
men, 185. 

Conference, daily, of manager and heads of departments, 182. 

Conference, weekly, of heads of departments and foremen, 180. 

Contract system for the payment of labor, 101. 

Control of expense accounts, 95. 

Cooperation among members of planning room staff, 203. 

Cooperation between planning department and gang bosses, 203. 

Cooperation, employers must do their part to obtain, 123. 

Cooperation obtained by scientific management, 123. 

Cost analysis, improvement in methods due to, 13, 114. 

Cost figures should be used and not treated as mere records, 65. 

Cost keeping versus accounting, 6. 

Cost of work card, description of, 67. 

Cost section records, 64. 

Cost system, information that can be obtained from a proper, 13. 

Cost system secret and not subject to criticism, 8. 

Cost system should be devised by an expert shop organizer, 7. 

Cost system, uniform, for machine tool builders, 3. 

Cost system, uniform, not practicable for manufacturing and jobbing re- 
pair shops, 3. 

Costs, accurate, an essential feature of good management, 114. 

Costs, inaccurate, brought about ruinous competition among machine tool 
builders, 2. 

Costs, inaccurate, disturb trade, 4. 

Costs, inaccurate, for standard articles, 2. 

Costs, lack of interest in the best methods for obtaining, 11. 

Costs, operation, in smith shop, 219. 

Costs, purposes of, n, 23. 

Costs represent work accomplished, 13. 

Costs, reductions made in, at the Mare Island Navy Yard, 232. 

Costs, value of, not realized by some successful managers, 8. 

Costs which are scientifically accurate are not practicable, 23 

Cranes, jib, in machine shops frequently eliminate much wasted time, 162. 



INDEX 243 

Criticism, superficial, of expense accounts, will usually result in decreased 
efficiency, 88, 90. 

D 

Damage report form, 203. 

Damaged work or machines reported, 185, 200. 

Data and reports not necessary for the purposes of costs obscure real 
objects sought, 23. 

Day work can be improved, 100. 

Day work is usually unsatisfactory, 100. 

Day work system for the payment of labor, 100. 

Defects in plant equipment frequently overlooked, 135. 

Defects must be known before they can be remedied, 129. 

Defects usually unnoticed detected by time studies, 135. 

Delays in joiner shop due to poor organization, 223, 

Depreciation, decisions of courts regarding, 30. 

Depreciation, decisions of Interstate Commerce Commission, 30. 

Depreciation, determination of, 32. 

Depreciation, determination of amount to be charged off each year, 33. 

Depreciation due to gradual wearing out, 31. 

Depreciation due to machines or appliances becoming obsolete, 31. 

Depreciation, ignorance regarding, 30. 

Depreciation, Interstate Commerce Commission refuses to promulgate 
standard rates, 33. 

Depreciation, machine tool builders' rates for, 32. 

Depreciation, must be charged to output, 31. 

Depreciation, treatment of in foreign countries, 30. 

Depreciation, usual methods for apportioning are unsatisfactory, 34. 

Diagram of organization should show duties and responsibilities of each 
official and their relations to each other, 139. 

Differential piece-rate system compared with the premium system, 107. 

Differential piece-rate system for the payment of labor, 109. 

Differential piece-rate system requires a scientific rate-making depart- 
ment, in. 

Direct labor charges, importance of accuracy in obtaining, 26. 

Direct labor, definition of, 24. 

Direct labor method for the distribution of indirect costs, 45. 

Direct material, definition of, 27. 

Disciplinarian, shop, 197. 

Dispatching and receiving space in each shop, 177, 185. 

Distribution of general expense, 53. 

Distribution of indirect costs, any scheme of, can be criticized, 41. 

Distribution of indirect costs by direct labor hours, 48. 

Distribution of indirect costs by direct labor wages, 45, 46. 

Distribution of indirect costs by machine rates, 42. 

Distribution of indirect costs must be in accordance with benefits re- 
ceived, 41. 

Distribution of indirect cost, simple method the best for the majority of 
establishments, 49. 

Distribution of power plant expenses, 43, 82. 

Distribution of selling expense, 54, 87. 

Distribution of shop expense, 50, 53. 

Distribution of storehouse expense, 53, 84. 

Dividends paid from capital, 19. 

Drafting room considered in its relation to the shops, 166. 

Drafting room frequently more badly managed than the shops, 166. 

Drafting room, functional management in, 166. 

Drafting room, improvement in methods of, 167. 



244 INDEX 

Drafting room should be systematized by an expert, 166. 

Drawings, corrections of, should be reported, 186. 

Drawings, issue to workmen, 186. 

Drive methods not successful in dealing with workmen, 130. 

Drop forge department of smith shop, 1,31, 213. 

Duties and responsibilities of officers should be clearly defined, 138. 



Economies that may be effected are indicated by an analysis of costs, 

13. 114. 
Efficiency does not vary inversely as the number of non-producers, 88, 144. 
Energy wasted in holding up that which has been built up, 144. 
Enthusiasm of manager and heads of departments necessary if the highest 

efficiency is to be obtained, 166. 
Equipment, poor, wasted time due to, 128. 
Expense accounts, control of, 95. 

Expense accounts, retrenchment usually begins with reductions in, 91. 
Expense accounts, superficial criticism of, will usually result in decreased 

efficiency, 88, 90. 
Expense accounts, supervision of, 17, 95. 

Expense burden sometimes averaged and applied to all labor, 21. 
Expense percentage can be reduced by employing hand work for machine 

work, 93. 
Expense percentage can be reduced by employing high class labor for work 

that should be done by inferior labor, 92. 
Expense percentage can be reduced by reducing the output of employees, 

94- 
Expense percentages for different establishments cannot be compared, 95. 
Expense, shop, can be reduced by neglect of machinery and appliances, 92. 
Exception man, the foreman should be, 196. 

Expert organizer necessary in introducing scientific management, 138, 143. 
Expert should systematize the drafting room, 166. 

F 

Factory cost, definition of, 29. 
Financial control versus works manager, 88. 

Fixed charges should be apportioned to shops and departments, 50. 
Flag shop, details of shop system, 227. 
Foreman, duties of, 196, 214. 
Foreman is the exception man, 196. 
Foreman is the shop disciplinarian, 197. 
Foreman, smith shop, duties of, 214. 
Foremen make suggestions at weekly conference, 180. 
Foremen, weekly conference of, and heads of departments, 180. 
Forge work, heavy, 213. 

Functional duties for executive officers, 139, 143. 
Functional duties in the shops, 155. 
Functional duties should be quietly put in effect, 155. 
Functional management, F. W. Taylor, on, 157. 
Functional management in the office and drafting room, 165. 
Functional management outside of shops, 165. 

Functional management, superintendents must understand principles of, 
158. 

G 

Gang boss, duties of, 198. 

Gantt bonus system for the payment of labor, 107. 

Gantt, H. L., on standardization, 164. 



INDEX 245 

Gantt, H. L., on task setting, 112. 

General expense, analysis of, 96. 

General expense, definition and charge symbols for subdivisions of, 53, 71. 

Government shops, difficult to follow the best methods in, 169. 

Grinding tools by workmen should be prohibited, 148. 

Grinding, tool, should be done in central grinding room, 148, 178. 

Guesswork; if we guess at the cause of defects, we must guess at the 

remedy, 129. 
Guesswork, many managers fail on account of, 129 

H 

Halsey premium plan for the payment of labor, 103. 

Heat, power and light, subdivisions of, with charge symbols, 79. 

Heavy forge work, 213. 

History of each department or shop is given by cost records, 16. 



Ideals, scientific, must not interfere with commercial success, 40. 

Important business, to-day's, 186. 

Improvement made by means of time studies, 131, 135. 

Inaccurate costs brought ruinous competition among machine tool build- 
ers, 2. 

Inaccurate costs disturb trade, 4. 

Inaccurate costs for standard articles, 2. 

Incentive, lack of, under the daywork system, 100. 

Index cards for jigs and special tools, 203. 

Indirect charges, analysis of, to obtain working minimum, 17, 96. 

Indirect charges, comparison of, by curves or parallel columns, 17, 95. 

Indirect charges, definition of, 29. 

Indirect charges, monthly scrutiny of, by the manager, 17, 95. 

Indirect cost, definition of, 29. 

Indirect cost, distribution by actual rates or average rates, 48. 

Indirect cost, distribution by direct labor hours, 48. 

Indirect cost, distribution by direct labor wages, 45, 46. 

Indirect cost, distribution by machine rates, 42. 

Indirect cost, elements of, 30, 71. 

Indirect cost, method of determination should depend on whether work 
is paid for on the basis of cost plus a profit, 40. 

Indirect cost should be distributed in accordance with benefits received, 41. 

Indirect costs, many attach themselves to machine tools, 42. 

Industrial railway, use of, in smith shop, 213. 

Information, many complaints that it cannot be obtained from accounting 
department, 67. 

Information obtained from a monthly balance, 18. 

Information regarding costs should be furnished superintendents and fore- 
men, 65. 

Inspection of tools when turned in by workmen, 148. 

Inspector, duties of, 199. 

Instruction card, machine shop, description of, 192, 193. 

Instruction card, smith shop, description of, 217. 

Instruction card holders, 202. 

Instruction card man, 192. 

Instructions regarding care of belts, 152. 

Insurance and Taxes, 36. 

Interest and rent should be charged to product, 37. > 

Interstate Commerce Commission, hearings before, in the rate cases, 137. 

Interstate Commerce Commission refuses to promulgate standard rates of 
depreciation, S3- 



246 INDEX 

Inventory card for material in smith shop store, 222. 
Inventory, perpetual, of tools, 148. 
Investigation of small tool equipment, 147. 

Investigation to determine conditions and the best means to remove de- 
fects, 145. 
Investigations, assignment of, to assistants, 145. 
Investigations, complete report of, should be made, 146. 



Jigs and special tools, records of, 154. 

Job order card, description of, 65. 

Job order or production order, 56. 

Job orders, numbering of, 57. 

Joiner shop, analysis of work in, 225. 

Joiner shop, delays due to poor organization, 223. 

Joiner shop, details of shop system, 223. 

Joiner shop, machine work, 226. 

Joiner shop, organization of, 222. 

Joiner work, planning of, 226. 

Judgment, good, 21. 



Labor and material charged to expense orders, 64. 

Labor charges, daily, should represent work accomplished, 13. 

Labor charges should receive daily supervision, 14. 

Labor charges, record of, 62. 

Labor, daywork, can be improved by recording the daily output of each 

employee, 100. 
Labor, daywork, usually unsatisfactory due to lack of incentive, 100. 
Labor, direct, definition of, 24. 
Labor, methods followed in the payment of, 100. 
Labor, payment of, under the bonus system, 107. 
Labor, payment of, under the contract system, 101. 
Labor, payment of, under the day-work system, 100. 
Labor, payment of, under the differential piece-rate system, 109. 
Labor, payment of, under the premium system, 103. 
Light, power and heat, subdivisions of, with charge symbols, 79. 
Literature, little available on cost keeping for manufacturers, 12. 
Loafing, wasted time due to, 127. 

M 

Machine rate method for distribution of indirect costs, 42. 

Machine shop, Mare Island, condition previous to the application of scien- 
tific principles of management, 170. 

Machine shop, organization of, 184. 

Machine tool builders' association rates for depreciation, 32. 

Machine Tool Builders' Association report on cost keeping methods, 2. 

Machine tools and transmission machinery, care of, 153. 

Machine tools, repair man should be made responsible for the care of, 154, 
200. 

Machine tools, many indirect costs attach themselves to, 42. 

Machine work in a joiner shop, 226. 

Machine work, reductions in cost of, at the Mare Island Navy Yard, 236, 

Machines are the best suited to each operation employed, 121. 

Maintenance of plant equipment is a profitable field for investigation, 161. 

Maintenance of plant equipment should be under supervision of an ex- 
pert, 161, 163. 



INDEX 247 

Management, accurate cost keeping an essential part of good, 114. 

Management an art, F. W. Taylor on, 115. 

Management, functional, F. W. Taylor on, 157. 

Management, functional, in office and drafting room, 165. 

Management, functional, outside of shops, 165. 

Management, fundamental principles of, 117. 

Management, system of, recommended by competent engineers increases 
overhead expense, 115. 

Manager and heads of departments, daily conference of, 182. 

Manager can develop a planning department, 159. 

Manager should arouse enthusiasm for scientific methods, 166. 

Manager should be fully informed of fundamental conditions under which 
work is accomplished, 135. 

Manager should investigate his own plant before deciding that he can 
derive no benefits from scientific management, 124. 

Manager should know the amount of wasted time and the causes, 127, 129. 

Manager should know what is taking place in his plant, 127, 129. 

Managers fail because of guesswork, 129. 

Managers, some successful, do not realize the value of an accurate cost 
system, 8. 

Material and labor charged to expense orders, 64. 

Material and move man, smith shop, 216. 

Material charges, record of, 63. 

Material, direct, definition of, 27. 

Material man, duties of, 190. 

Material, minor, obtained from shop stores, 28, 63, 174. 

Material, returned, should be credited to the job, 64. 

Material, summary of requisitions for, 68. 

Material supply, 174. 

Material supply, smith shop, 220. 

Material transportation by plant railway system, 175. 

Material transportation by regular team service, 177. 

Material, transportation of, 175. 

Material unused on a job, should be returned to store, 64. 

Methods, best, for doing work, should be determined before work is be- 
gun, 120. 

Methods, drive, not successful, 130. 

Methods followed in a government plant in applying the principles of 
scientific management, 169. 

Methods, standard, can and should be improved, 165. 

Methods, standardization of, 164. 

Methods, uneconomical, exposed at weekly conference, 181. 

Move and material man, smith shop, duties of, 216. 

Move man, duties of, 199. 

Mustering the workmen, 60. 

N 

Non-producers, the number of, is no measure of efficiency, 90, 144. 
Numbering job orders, 57. 



Observation card, shop, 203. 

Obsolete, depreciation due to machines and appliances becoming, 31. 
Office, functional management in, 165. 
Officials should be assigned functional duties, 139. 
Oil fuel, use of in smith shop, 135, 222. 

Opposition of foremen to the employment of a competent shop super- 
intendent, 142, 145. 



248 INDEX 

Opposition to changes in organization, 141. 

Orders, shop, description of, 57, 173. 

Organization, faults of usual shipyard, 140. 

Organization of a canvas shop, 227. 

Organization of a central tool grinding and issue room, 178. 

Organization of a flag shop, 227. 

Organization of a joiner shop, 222. 

Organization of a machine shop, 184. 

Organization of a smith shop, 208. 

Organization should be shown by diagram, 139. 

Overhead charges, relation between, and total cost. 89. 



Papers, delivery of to shops and offices, 171. 

Patterns, standard, first piece cast from, examined by planning department, 
185. 

Percentages, expense, no measure of efficiency, 95. 

Planner, chief, duties of, 187. 

Planning department, beginning of, 158, 159. 

Planning department, general duties of, 184. 

Planning department, general instructions to, 184. 

Planning department issues detail instructions defining duties of tool room 
keepers, tool boys, crane men, etc., 187. 

Planning department issues shop orders, 186. 

Planning department makes an analysis of the work, 184. 

Planning department should control time studies, 161. 

Planning department supreme in routing work, 184. 

Planning department which can be developed by a manager, 159. 

Plant development accounts, 85, 86. 

Plant equipment, defects in, frequently overlooked until detail investiga- 
tion is made, 135, 162. 

Plant equipment, improvement of, expert should be employed in large 
establishment to supervise, 163, 

Plant equipment, maintenance of, is a profitable field for investigation, 
161. 

Plant equipment, small additions to, frequently increase output, 162. 

Plant equipment sometimes too great, 162. 

Plant, pneumatic, economies that can be effected, 162. 

Plant, upkeep of, 36. 

Power, heat and light, subdivisions of, with charge symbols, 79. 

Power plant expense, 52. 

Power plant expense distribution, 82. 

Premium system compared with the bonus system and differential piece- 
rate system, 107. 

Premium system for the payment of labor, 103. 

Principles, fundamental, which are applicable to all good cost systems, 3. 

Production order, 56. 

Profit, does every line make a, 20, 21. 

Profit, lines which show none should be eliminated, 20. 

Profitable, is every department, 21. 

Progress of work can be determined from the daily labor charges, 13. 

Progress, standards are not foes to, 164. 

Promises, difficulty in obtaining accurate, for completion of work, 173. 

Punishment of workmen, 172. 

Purposes of costs, 11, 23. 

R 



Railway, industrial, in smith shop, 213. 
Railway system, plant, 176. 



INDEX 249 

Rates, shall actual or average be used to distribute indirect charges, 43. 

Record of labor charges, 62. 

Record of material charges, 63. 

Record, shop, card, 203. 

Records, cost figures should not be mere, 65. 

Records, cost section, 64. 

Records of belts necessary, 152. 

Records of tools ground in central grinding station, 179. 

Records of workmen, 172. 

Receiving and dispatching space in each shop, 177, 185. 

Reductions in cost made at the Mare Island Navy Yard, 232. 

Rent and interest charged to product, ^7- 

Rent, two elements of, 2>7- 

Repair man, duties of, 200. 

Repair man responsible for condition of machine tools, 154, 200. 

Reports and data not necessary for the two purposes of costs, obscure 

real objects, 23. 
Route man, smith shop, duties of, 215. 
Route sheet, information given on, 187. 
Routing work by the planning department, 187. 



Scientific management, adherence to the principles of, reduced costs at 
the Mare Island Navy Yard, 232. 

Scientific management, application of the principles of, brings about co- 
operation, 123. 

Scientific management defined, 117. 

Scientific management, many see only machinery of, 117. 

Scientific management, not easy to follow principles of, 124. 

Scientific management, not red tape methods, 116. 

Scientific management, opposition to will eventually disappear, 116, 137. 

Scientific rate-making department necessary with the bonus system, in. 

Scrutiny, monthly, of indirect charges by the manager, 17, 95. 

Secrecy regarding cost systems, 8. 

Selling expense, 54, 87. 

Selling expense, subdivisions of, with charge symbols, 86. 

Service cards, description of, 62. 

Shop clerk, duties of, 195, 216. 

Shop expense, 75. 

Shop expense, analysis of, 95. 

Shop expense, distribution of, 50, 53. 

Shop expense, subdivisions, with charge symbols, 75. 

Shop observation card, 203. 

Shop orders, description of, 57, 173. 

Shop orders for expense account work, 60. 

Shop orders for output, 60. 

Shop orders issued by the planning department, 186. 

Shop record card, 203. 

Shop superintendent in charge of shipyard shops, 140. 

Shops, relation of drafting room to, 166. 

Shipbuilding costs, reduction of, 232. 

Shipyard organization is usually faulty, 140. 

Shipyard pneumatic plant, investigation of, 162. 

Shipyard shops should form one homogeneous organization with standard 
methods, 140. 

Smith shop, duties of assistant foreman, 215. 

Smith shop, duties of clerk, 216. 

Smith shop, duties of foreman, 214. 



25O INDEX 

Smith shop, duties of material and move man, 216. 

Smith shop, duties of route man, 215. 

Smith shop, general arrangement of, 209, 213. 

Smith shop, industrial railway in, 213. 

Smith shop, instruction cards, 217. 

Smith shop, material supply, 220. 

Smith shop, oil fuel in, 135, 222. 

Smith shop, operation costs, 219. 

Smith shop, operation of shop system, 216. 

Smith shop, organization of, 208. 

Smith shop, store system, 222. 

Smith shop, subdepartments of, 213. 

Smith shop, tools, drawings and material, assembly of, 219. 

Smith shop, transportation facilities, 213. 

Smith shop, work board, 217, 218. 

Speed boss, duties of, 198. 

Standard methods can and should be improved, 165. 

Standard shapes for tools, 147. 

Standards are not foes to progress, 164. 

Standards should be best methods known to men best qualified to judge, 

164. 
Standards should be clearly defined in writing, 164. 
Standardization, definition of, 164. 
Standardization, H. L. Gantt on, 164. 
Standardization, method of, 164. 
Standing order board man, duties of, 195. 
Standing order boards, description of, 201. 
Standing order slips, briefs of instruction cards, 193. 
Storehouse expense, 52. 
Storehouse expense, distribution of, 84. 
Storehouse expense subdivisions with charge symbols, S3. 
Store system, improvement of, 168. 
Store system, requirements of, 168. 
Stores, shops should have a daily balance of, 168. 
Suggestions made by foremen at weekly conference, 180. 
Summary, monthly, of expenditures under the expense accounts, 99. 
Summary of material requisitions, 68. 
Supervision, daily, of labor charges, 14. 
Supervision of expense accounts, 17, 88, 95. 
Supply of small tools, 148. 
System, machine shop, operation of, 201. 
System, shop, at the Mare Island Navy Yard, 170. 



Task, daily, should be provided for every employee, 138. 

Taxes and insurance, 36. 

Taylor differential piece-rate system for the payment of labor, 109. 

Taylor, F. W., on functional management, 157. 

Taylor, F. W., on management as an art, 115. 

Taylor, F. W., on necessity for an expert to introduce scientific manage- 
ment, 137. 

Taylor, F. W., on task setting, in. 

Team service between shops and storehouse, 177. 

Time cards, description of, 62. 

Time studies bring out defects which do not usually attract attention, 
135, 162. _ _ 

Time studies bring out fundamental conditions under which work is ac- 
complished, 135. 



INDEX 25I 

Time studies, examples of improvements made by means of, 131, 135. 

Time studies indicate remedy for defects, 161. 

Time studies should be made under the direction of the planning de- 
partment, 161. 

Time studies show wastes, 130. 

Time studies, use of in making improvements in a smith shop, 135. 

Time study man, duties of, 156. 

Tool, central, issuing room, .178. 

Tool delivery boys, 148, 200. 

Tool dressing and tempering department of smith shop, 213. 

Tool equipment, investigation of small, 147. 

Tool issue room, future expansion should be provided, 149. 

Tool making and repairing should be done in the shop and not in the 
tool room, 150. 

Tool steel, disadvantage of several kinds for the same purpose, 147. 

Tool steel, Navy specifications, 147. 

Tool steel, uniform quality should be obtained, 147. 

Toolmaker, head, duties of, 199. 

Tools, breakage of, methods to be followed, 149. 

Tools, correct card inventory of, 148. 

Tools, delivery of to machines, 200. 

Tools, determination of standard shapes, 147. 

Tools, double check system for issue of, 148. 

Tools, grinding of by workmen should be prohibited, 148. 

Tools should be supplied workmen by tool boys, 148, 200. 

Tools should receive careful inspection when turned in by workmen, 148. 

Tools, small, ample supply necessary, 148. 

Tools, special and jigs, care of, and records, 154. 

Tools, special and jigs, index card for, 203. 

Transportation methods are of great importance, 175. 

U 
Upkeep of plant, 36. 
Urgent work and papers, 175. 

V 

Value of product must sometimes be obtained by monthly estimates, 18. 

W 

Wages at the Mare Island Navy Yard, 232. 

Waits, unnecessary, wasted time due to, 128. 

Wasted time and the high cost of living, 127. 

Wasted time detected by time studies, 130. 

Wasted time due to employment on suitable work, 128. 

Wasted time due to faults of employees and management, 129. 

Wasted time due to loafing, 127. 

Wasted time due to poor equipment, 128. 

Wasted time due to unnecessary waits, 128. 

Wasted time, manager should know the amount and the causes, 130. 

Work, accomplished by each day-worker should be recorded daily, 100. 

Work, best methods for, should be determined before it is undertaken, 

120. 
Work, damaged, should be reported, 185, 200. 
Work day by day represented by direct labor cost, 13. 
Work definitely defined on job order, 56. 

Work in each shop or department should carry its own burden, 50. 
Work of like nature should be grouped under one head, 140, 155. 



252 INDEX 

Work, promises for completion of, 173. 

Work, progress of, can be determined from the daily labor charges, 13. 

Work routed by planning department, 184. 

Work should be analyzed before it is undertaken, 119, 184. 

Work, unsuitable, wasted time due to, 128. 

Workmen best suited to each class of work should be employed., 121. 

Workmen, deserving should be encouraged, 197. 

Workmen do not respond to drive methods, 130. 

Workmen, muster of, 60. 

W r orkmen, punishment of, 172. 

W r orkmen, records of, 172. 

Workmen report unsatisfactory conditions to gang bosses, 185. 

Workmen should not go to tool room for tools, 148, 200. 

Works manager versus financial control, 88. 



W114 



JUL U i»H 







S- ^ 







f. ' .*l'**i% "o A*" •°_^> ^fe_ f.O' .*1V^, °o ^ 





cv # 




^ 



,4°* 




: *W ••»- V^ 4ik- % 

^ *<* : % »|K- ^ -Sift *** *** 



r^h. 



%,^ .*. 












,* 









*9 v\ " ^ 



A°o 



\/ %**-^V v™V %'^v \/^ 







%f 













5«3* 







A* .' 







5% 



* 













♦*<* 






* 



* A>-% 




^ 
*> 
















/ ,# v % 



° ^ A^ 











^^. 



* % ^ . 






WERT H 

BOOKBINDINC II 

MIOOLET0WN. PA H ' ■» A.I* 




&" S&fc. V ,A* ..^^. V .,* V . v ^&. %» A*' 



LIBRARY OF CONGRESS 



021 183 184 I 



■ 




ai 



